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PRPL Nurples- Why purple valuation just might make your NIPS hard - DD inside

PRPL Nurples- Why purple valuation just might make your NIPS hard - DD inside
All- I have received hundreds of DM asking where the stock is going. I have received questions such as: where do you think it stops, is it over valued, undervalued, should my mom invest, should i Yolo, should i sell and take profits? blah, blah blah. Here is some DD- stop asking me about where this ends up because I don't know for sure but I have some Feely Good estimates. I hope this post makes your nipples hard and if it doesn't you're probably a gay bear.
I am going to give you a quick run down of what my expectations are for Q2 earnings and it will include the good, the bad and the ugly. The ugly being the warrant accrual that will hurt GAAP.
First of all, There is little that needs to be determined for Q2 top-line as they have already released April and May Sales. April Sales Came in around ~62M based on my math and May Sales came in at 88M and some change. Based on these numbers, we can safely assume that we will at a minimum have somewhere around 225M in revenue for the quarter by using the average of April and May to determine June. I believe 225M to be on the low side and I have continued to up my estimates as I believe E-commerce is still thriving, especially purple. Purple continues to climb the web traffic ladder and has moved up another ~500 spots to be the 13,000 most popular site in the world.

For simplicity sake, I am going to use some historical numbers to estimate profits. If you'll look at previous posts that I've made then you'll see how I arrived at these numbers. There are some quick napkin calculations below. We can safely assume that the average wholesale selling price of a mattress is ~1350 dollars and we can assume that GM for wholesale is around 30%. This means the average cost of a mattress to manufacture is ~945 on average. From my previous posts, we knew that pre Covid the business was split by units, not by gross sales. On average, wholesale consumed 50% of capacity and DTC consumed 50% of capacity. In order to determine average DTC selling price then we can equation .5*1350 + .5*(DTC Price) = 1900. PRPL indicated their average selling price per mattress was ~1900.00, I found this in their s-3.
-----------------------------------
.5*1350 + .5*(DTC Price) = 1900=========== DTC average price is 2450.00, 1350 is average Wholesale price.
DTC Margin is ~62% Estimated
Wholesale Margin ~30% Estimated
----------------------------------
Historically, advertising costs have been about 30% of revenue. I have been tracking advertisement for purple and from a TV cost standpoint, they have not increased their commercial count at all in the last three months. See link, PRPL is still only performing 125 commercials per day. This commercial rate has held steady for 6 months.
https://www.ispot.tv/brands/tqU/purple-mattress

I believe purple has increased their ad spend online but I believe it will be proportional to their new capacity on a unit basis.
Previously purple had 6 Machines of capacity and spent 38M in advertising, I believe they will spend (7/6)*38M which is 44M or roughly 15M per month. Just because revenue is up, doesn't mean they will spend more per unit- they are capacity constrained and that is terribly inefficient.
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The following table shows my best guesses on their major category costs. This includes the gross Margin and the other costs subtracted from the Gross Margin.
April May June (Est) Total Revenue net revenue effect
Gross Margin from Wholesale 6M*30% 17.3*30% 20M*30% $13M
Gross Margin from DTC 56M*62% 71M*62% 55M*62% $112M
SG&A Costs (3.5)M (3.5)M (3.5)M ($10.5)M
Research and Development (1)M (1)M (1)M ($3)M
Advertising (15)M (15)M (15)M ($45)M
Profit Non GAAP ----------- ----------- --------- 66.5M or 1.23 EPS
Warrant Accrual ($35M)
Profit GAAP Estimated $31.5M or .59 EPS
---------------------------------------------------------------------------------------------------------------------------------------------------
If we used 66.5M, PRPL would report 1.23 EPS on an adjusted Basis.
The warrant Accrual will unfavorably push the EPS down on a GAAP basis and we will likely see something around .59 EPS. If they can achieve this for the next 4 quarters then in a years time there is a huge potential for stock increases based on the following P/E's.

GAAP est. Non GAAP Est.
EPS Annualized $2.36 $4.92
Stock price assuming 8x P/E $18.88 $39.36
Stock Price assuming 12x P/E $28.32 $59.04
Stock Price assuming 15x P/E $35.4 $73.8
Stock Price assuming 20x P/E $47.2 $98.4

People may say that this is super inaccurate..... but if you look at the following cash statement then you will realize that PRPL has been generating more than 1M per day in cash for the last two months - that is absolutely insane.

purple has generated 70M in cash in 60 days.
Mark my words, PRPL is going to be more profitable than TPX this quarter. TPX reported earnings of .68 EPS today on revenue of 665M. TPX is trading at 80+ per share. if purple reports a similar .68 EPS then it would be valued about 60% lower than TPX on an EPS basis. if purple posts EPS of ~1 dollar then it would be undervalued as compared to TPX by about 80%.

I hope your NIPS are tender now. Hope this helps you understand why I believe PRPL to be so undervalued.
submitted by dhsmatt2 to wallstreetbets [link] [comments]

$VERY Announces Significant Growth in its Online Initiatives

https://finance.yahoo.com/news/very-good-food-company-announces-100000032.html
Up +14% from yesterday. Some good increase in metrics that hopefully will translate to good financials.
submitted by FoxCalls to CanadianInvestor [link] [comments]

PRPL Q2 2020 Earnings Expectations

PRPL Q2 2020 Earnings Expectations

tl;dr - Earnings is gonna be lit!

PRPL earnings is tomorrow, 8/13, after hours. Any other date is wrong. Robinhood is wrong (why are you using Robinhood still!?!).
I'm going to take you through my earnings projections and reasoning as well the things to look for in the earnings release and the call that could make this moon even further.

Earnings Estimates

https://preview.redd.it/w3qad4gb9ng51.png?width=854&format=png&auto=webp&s=7a88656a9867d0e40710736f61974a22b5f4a631
I'm calling $244M Net Revenue with $39.75M in Net Income, which would be $0.75 Diluted EPS. I'll walk you through how I got here

Total Net Revenue

I make the assumption that Purple is still selling every mattress it can make (since that is what they said for April and May) and that this continued into June because the website was still delayed 7-14 days across all mattresses at the end of June.
May Revenue and April DTC: The numbers in purple were provided by Purple here and here.
April Wholesale: My estimate of $2.7M for Wholesale sales in April comes from this statement from the Q1 earnings release: " While wholesale sales were down 42.7% in April year-over-year, weekly wholesale orders have started to increase on a sequential basis. " I divided Q2 2019's wholesale sales evenly between months and then went down 42.7%.
June DTC: This is my estimate based upon the fact that another Mattress Max machine went online June 1, thus increasing capacity, and the low end model was discontinued (raising revenue per unit).
June Wholesale: Joe Megibow stated at Commerce Next on 7/30 that wholesale had returned to almost flat growth. I'm going to assume he meant for the quarter, so I plugged the number here to finish out the quarter at $39.0M, just under $39.3M from a year ago.

Revenue Expectations from Analysts (via Yahoo)
https://preview.redd.it/notxd6hhbng51.png?width=384&format=png&auto=webp&s=aa0453414f467aa6c5bf72ce8a8046c0ae6e62a5
My estimate of $244M comes in way over the high, let alone the consensus. PRPL has effectively already disclosed ~$145M for April/May, so these expectations are way off. I'm more right than they are.

Gross Margins

I used my estimates for Q3/Q4 2019 to guide margins in April/May as there were some one time events that occurred in Q1 depressing margins. June has higher margin because of the shift away from the low end model (which is priced substantially lower than the high end model). Higher priced models were given manufacturing priority.

Operating Expenses

Marketing and Sales
Joe mentioned in the Commerce Next video that they were able to scale sales at a constant CAC (Customer Acquisition Cost). There's three ways of interpreting this:
  1. Overall customer acquisition cost was constant with previous quarters (assume $36M total, not $93.2M), which means you need to add another $57M to bottom line profit and $1.08 to EPS, or
  2. Customer Acquisition Costs on a unit basis were constant, which means I'm still overstating total marketing expense and understating EPS massively, or
  3. Customer Acquisition Costs on a revenue basis were constant, which is the most conservative approach and the one I took for my estimate.
I straightlined the 2.2 ratio of DTC sales to Marketing costs from Q1. I am undoubtably too high in my expense estimate here as PRPL saw marketing efficiencies and favorable revenue shifts during the quarter. So, $93.2M
General and Administrative
A Purple HR rep posted on LinkedIn about hiring 330 people in the quarter. I'm going to assume that was relative to the pre-COVID furloughs, so I had June at that proportional amount to previous employees and adjusted April and May for furloughs and returns from furlough.
Research and Development
I added just a little here and straight lined it.

Other Expenses

Interest Expense
Straightlined from previous quarters, although they may have tapped ABL lines and so forth, so this could be under.
One Time and Other
Unpredictable by nature.
Warrant Liability Accrual
I'm making some assumptions here.
  1. We know that the secondary offering event during Q2 from the Pearce brothers triggered the clause for the loan warrants (NOT the PRPLW warrants) to lower the strike price to $0.
  2. I can't think of a logical reason why the warrant holders wouldn't exercise at this point.
  3. Therefore there is no longer a warrant liability where the company may need to repurchase warrants back.
  4. The liability accrual of $7.989M needs to be reversed out for a gain.
This sucker is worth about $0.15 EPS on its own.

Earnings (EPS)

I project $39.75M or $0.75 Diluted EPS (53M shares). How does this hold up to the analysts?
EPS Expectations from Analysts (via Yahoo)
https://preview.redd.it/o2i1dvk6hng51.png?width=373&format=png&auto=webp&s=27e63f7934d85393e1f7b87bf2e2066c28047202
EPS Expectations from Analysts (via MarketBeat)
https://preview.redd.it/psu5rajfhng51.png?width=1359&format=png&auto=webp&s=0612d43777c644789b14f8c5decbe36f41925f5e
These losers are way under. Now you know why I am so optimistic about earnings.
Keep in mind, these analysts are still giving $28-$30 price targets.

What to Watch For During Earnings (aka Reasons Why This Moons More)

Analysts, Institutionals, and everyone else who uses math for investing is going to be listening for the following:
  • Margin Growth
  • Warrant Liability Accrual
  • Capacity Expansion Rate
  • CACs (Customer Acquisition Costs)
  • New Product Categories
  • Cashless Exercise of PRPLW warrants

Margin Growth
This factor is HUGE. If PRPL guides to higher margins due to better sales mix and continued DTC shift, then every analyst and investor is going to tweak their models up in a big way. Thus far, management has been relatively cautious about this fortuitous shift to DTC continuing. If web traffic is any indicator, it will, but we need management to tell us that.
Warrant Liability Accrual
I could be dead wrong on my assumptions above on this one. If it stays, there will be questions about it due to the drop in exercise price. It does impact GAAP earnings (although it shouldn't--stupid accountants).
Capacity Expansion Rate
This is a BIG one as well. As PRPL has been famously capacity constrained: their rate of manufacturing capacity expansion is their growth rate over the next year. PRPL discontinued expansion at the beginning of COVID and then re-accelerated it to a faster pace than pre-COVID by hurrying the machines in-process out to the floor. They also signed their manufacturing space deal which has nearly doubled manufacturing space a quarter early. The REAL question is when the machines will start rolling out. Previous guidance was end of the year at best. If we get anything sooner than that, we are going to ratchet up.
CACs (Customer Acquisition Costs)
Since DTC is the new game in town, we are all going to want to understand exactly where marketing expenses were this quarter and, more importantly, where management thinks they are going. The magic words to listen for are "marketing efficiencies". Those words means the stock goes up. This is the next biggest line item on the P&L besides revenue and cost of goods sold.
New Product Categories
We heard the VP of Brand from Purple give us some touchy-feely vision of where the company is headed and that mattresses was just the revenue generating base to empower this. I'm hoping we hear more about this. This is what differentiated Amazon from Barnes and Noble: Amazon's vision was more than just books. Purple sees itself as more than just mattresses. Hopefully we get some announced action behind that vision. This multiplies the stock.
Cashless Exercise of PRPLW Warrants
I doubt this will be answered, even if the question is asked. I bet they wait until the 20 out of 30 days is up and they deliver notice. We could be pleasantly surprised. If management informs us that they will opt for cashless exercise of the warrants, this is anti-dilutive to EPS. It will reduce the number of outstanding shares and automatically cause an adjustment up in the stock price (remember kids, some people use math when investing). I'm hopeful, but not expecting it. The amount of the adjustment depends on the current price of the stock. Also, I fully expect PRPL management to use their cashless exercise option at the end of the 20 out of 30 days as they are already spitting cash.

Positions


https://preview.redd.it/tho65crvkng51.png?width=1242&format=png&auto=webp&s=6241ff5e8b26744f9d7119ddef7da86f163c741d
I'm not just holding, I added.
PRPLW Warrants: 391,280
PRPL Call Debit Spreads: 17.5c/25c 8/21 x90, 20c/25c 8/21 x247
Also, I bought some CSPR 7.5p 8/21 x200 for fun because I think that sucker is going to get shamed back down to $6 after a real mattress company shows what it can do.

UPDATES

I've made some updates to the model, and produced two different models:
  1. Warrant Liability Accrual Goes to Zero
  2. Warrant Liability Accrual Goes to $47M
I made the following adjustments generally:
  • I reduced marketing expenses signifanctly based upon comments made by Joe Megibox on 6/29 in this CNBC video to 30% of sales (thanks u/deepredsky).
  • I reduced June wholesale revenue to 12.6M to be conservative based upon another possible interpretation of Joe's comments in this video here. It is a hard pill to swallow that June wholesale sales would be less than May's. The only reasoning I can think of is if May caused a large restock and then June tapered back off. The previous number of $19.0M was still a retrenchment from the 40-50% YoY growth rate. I'm going to keep the more conservative number (thanks again u/deepredsky).
  • I modified the number of outstanding shares used for EPS calculations from 53M (last quarters number used on the 10-Q) to almost 73M based upon the fact that all of the warrants and employee stock options are now in the money. Math below. (thanks DS_CPA1 on Stocktwits for pointing this out)
Capital Structure for EPS Calculations
From the recent S-3 filing for the May secondary, I pulled the following:
https://preview.redd.it/qw7awg8w7sg51.png?width=368&format=png&auto=webp&s=66c884682ddb8517939468ab1e6780742f55d427
I diluted earnings by the above share count.

Model With Warrant Liability Going to Zero
https://preview.redd.it/cz2ydomi4sg51.png?width=852&format=png&auto=webp&s=53cc457a3143cabb16bfff9a1503054a9a8c0fca
Model With Warrant Liability Going to $47M
https://preview.redd.it/o2hltrgf5sg51.png?width=853&format=png&auto=webp&s=41cbe73a7aa0894a86a09ccc9179b100e9d3372d
A few people called me out on my assumption, that I also said could be wrong. My favorite callout came from u/lawschoolbluesny who started all smug and condescending, and proceeded to tell me about June 31st, from which I couldn't stop laughing. Stay in law school bud a bit longer...
https://preview.redd.it/dd4tcdue4sg51.png?width=667&format=png&auto=webp&s=d27f3ad40c702502ee62f106b6135f0db2c1e7be
One other comment he made needs an answer because WHY we are accruing MATTERS a lot!
Now that we have established that coliseum still has not exercised the options as of july 7, and that purple needs to record as a liability the fair value of the options as of june 31, we now need to determine what that fair value is. You state that since you believe that there is no logical reason that coliseum won't redeem their warrants "there is no longer a warrant liability where the company may need to repurchase warrants back." While I'm not 100% certain your logic here, I can say for certain that whether or not a person will redeem their warrants does not dictate how prpl accounts for them.

The warrant liability accrual DOES NOT exist because the warrants simply exist. The accrual exists because the warrants give the warrant holder the right to force the company to buy back the warrants for cash in the event of a fundamental transaction for Black Scholes value ($18 at the end of June--June 31st that is...). And accruals are adjusted for the probability of a particular event happening, which I STILL argue is close to zero.
A fundamental transaction did occur. The Pearce brothers sold more than 10M shares of stock which is why the exercise price dropped to zero. (Note for DS_CPA1 on Stocktwits: there is some conflicting filings as to what the exercise price can drop to. The originally filed warrant draft says that the warrant exercise price cannot drop to zero, but asubsequently filed S-3, the exercise price is noted as being able to go to zero. I'm going with the S-3.)
Now, here is where it gets fun. We know from from the Schedule 13D filed with a July 1, 2020 event date from Coliseum that Coliseum DID NOT force the company to buy back the warrants in the fundamental transaction triggered by the Pearce Brothers (although they undoubtably accepted the $0 exercise price). THIS fundamental transaction was KNOWN to PRPL at the end Q4 and Q1 as secondary filings were made the day after earnings both times. This drastically increased the probability of an event happening.
Where is the next fundamental transaction that could cause the redemption for cash? It isn't there. What does exist is a callback option if the stock trades above $24 for 20 out of 30 days, which we are already 8 out of 10 days into.
Based upon the low probability of a fundamental transaction triggering a redemption, the accrual will stay very low. Even the CFO disagrees with me and we get a full-blown accrual, I expect a full reversal of the accrual next quarter if the 20 out of 30 day call back is exercised by the company.
I still don't understand why Coliseum would not have exercised these.
Regardless, the Warrant Liability Accrual is very fake and will go away eventually.

ONE MORE THING...

Seriously, stop PMing me with stupid, simple questions like "What are your thoughts on earnings?", "What are your thoughts on holding through earnings?", and "What are your thoughts on PRPL?".
It's here. Above. Read it. I'm not typing it again in PM. I've gotten no less than 30 of these. If you're too lazy to read, I'm too lazy to respond to you individually.

submitted by lurkingsince2006 to wallstreetbets [link] [comments]

Capital Requirements

How much money would I need to put up to trade 1 contract of /MNQ in thinkorswim? I haven’t funded my account yet with them and am curious how much will be need for each contract, I would like to trade 5 at a time to get 10$ per 1 point move
submitted by YLV01 to FuturesTrading [link] [comments]

What if I told you OPERATION 10 BAGS is actually OPERATION 20 BAGS - Courtesy of Albertsons (ACI)

Edit 1: I wouldn't rush to get in immediately with how poor SPY/QQQ look at open. Waiting until later in the day when they've maybe bottomed out is likely a better move
Edit 2: Broader market looks to have stabilized. Congrats if you bought the dip. But now is time to get balls deep - I'm in the process of tripling my position
u/trumpdiego 's post from a few days ago on ACI inspired me to do some research of my own, and it seems operation 10 bags may actually be a 20 bagger
Post for reference: https://new.reddit.com/wallstreetbets/comments/huq9eq/operation\10_bags_brought_to_you_by_albertsons/)
TL;DR: ACI is a leader in multiple sub-sectors that the market has been pumping lately. Their stock hasn’t increased as much as competitors in the last month, and it is cheaper than all of them on a P/E basis. Grocery prices have been rising faster than ever before. ACI is driving customers to their stores at a rate higher than anyone else in the industry. Online grocery sales were likely close to a record $19B in Q2. ACI’s online grocery sales were up +243% in April, and close to +220% this last quarter. Both of those last two facts suggest over $36B in quarterly revenue, compared to a street consensus of ~$23B.
TL;DR for the TL;DR: Albertons Companies (ACI) 8/21 $20C’s are going to the moon when they report earnings before market open on Monday 7/27, but potentially sooner if any other online grocers report what you’re about to read below. And I'll show you exactly why referencing the data that the big bois use to evaluate investments.
Primer for the type of autist who likes to know what he’s YOLOing options on:
ACI is a food and drug retailer that offers grocery products, general merchandise, health and beauty care products, pharmacy, and fuel in the United States, with local presence and national scale. They also own Safeway, Tom Thumb , Acme, Shaw’s, Star Market, United Supermarkets, Vons, Jewel-Osco, Randalls, Market Street, Pavilions, Carrs, and Haggen as well as meal kit company Plated based in New York City. Additionally, ACI is the #1 or #2 grocer by market share in 68% of the 121 MSAs (Metropolitan Statistical Area) they operate in.
And here’s the good part:
ACI is a leader in the online grocery shopping/delivery marketplace. They offer home delivery services in ~65% of their 2,200 stores, and have partnerships with Instacart, Uber Eats, and Grubhub to facilitate 1-2 hour delivery in 90% of their locations. Guess whose stock is up 75% this quarter? Grubhub. Think the market likes food delivery?
Besides online grocery shopping, what else is surging due to COVID-19? Meal kits. And guess what, ACI is one of the only grocers with a meal kit offering. Demand is surging so much that Blue Apron (APRN) decided to go public on June 24th, and is already up 22.47% since then. Think the market likes meal kits?
Now back to your regularly scheduled programming:
Before I get into the industry and ACI specific numbers that make me TSLA levels of bullish on ACI – let me tell you what the market thinks.
Q: “Why do I care what the market thinks? I’m smarter than it!” – Probably most of you.
A: “Because it doesn’t matter how right you are if the market doesn’t agree, especially when YOLOing short term options.
Market Trends:
Over the last 30 days, ACI shares are up a meager 3.43%, currently trading at a 7.3x P/E multiple of consensus 2020 earnings. Check out what the most comparable companies to ACI have done over the last 30 days, and associated 2020 expected earnings P/E they are trading at:
Grocery Outlet (GO): +11.30% (39.7x)
Kroger (KR): +9.16% (11.9x)
Sprouts Farmers Market (SFM): +15.71% (15.1x)
So what does that tell you?
The market loves grocery stores right now in corona times (no shit), and ACI is relatively the cheapest stock out of all of them. The performance of Grubhub (+75% in Q2), Blue Apron (+22.47% since 6/24/20 IPO), and literally every single online retailer tell you the market’s opinion on online shopping, food delivery, and meal kits as well. If ACI were to trade at KR’s 11.9x P/E, that would make the stock worth $26.15, +63% from close today. Wonder what that means for option tendies…
Oh what’s that? You’re asking why ACI could start trading on par with KR at a 11.9x P/E? Great question! Let me get into why this sexy boi will print:
Starting from a macro perspective, CPI: Food at Home (NSA) is the consumer price metric that tracks inflation in food prices as grocery stores and related establishments. After deflating -.16% in 2018 and inflating just .03% in 2019, CPI: Food at Home (NSA) is +4.74% thus far in 2020. Why is this? Food prices are historically correlated with Disposable Personal Income, which also increased at its highest rate ever through Q2’2020. So as long as big daddy Powell has the money printer going brrrrrr, Albertsons will be making more and more money on each sale.
Now, this food price inflation does benefit every grocer. However, let’s take a look at the ID Sales (which is the grocer equivalent of same-store-sales) trends recently for ACI and its main competitors that I was able to find data on:

ACI KR SFM
Q1 +23.5% +19% +10%
March +47% +30% +26%
April +21% +20% +7%

So through at least April, ACI has been in a class of their own when it comes to generating repeated traffic at their locations. Courtesy of the fine people at Morgan Stanley, we also know ID Sales were +16% in June (so you can deduce they were in the +17% to +20% range in May), and still up “double-digit percentage” thus far in July.
So far we’re established that ACI is selling their products for the most they ever have, and generating more traffic at identical stores than all their competitors. This data is affirmed by JP Morgan’s foot traffic index which shows ACI taking customer from Kroger.
But wait – here’s the sexy part:
Time to forecast ACI’s online sales this quarter using published industry data:
According to new research released 7/6/20 by Brick Meets Click and Mercatus, U.S. online grocery sales hit a record $7.2 billion in June, up 9% over May. Let’s do some quick maths and deduce that online grocery sales were $6.61B in May. Now let’s be super conservative and say May was a 20% increase over April (realistically I would guess closer to +5-10%), and that gives us $5.51B in online grocery sales in April. This means we likely had ~$19B in online grocery sales in Q2.
As ACI represented 1.60% of the online grocery marketplace in 2019, that would imply $304M in online revenue this past quarter. This is very conservative though, as even after assuming a 20% drop in April relative to May, we also assumed their market share stayed at 1.60%. Remember those nice people at JPM who’s foot traffic tracker told us that ACI was stealing customers from KR? Well they also estimate ACI’s 1.60% market share in online groceries to reach 2.50%-2.80% in 2025, with a CAGR (cumulative average growth rate) of ~9% in market share per year. That means their 1.60% market share is likely 1.744% now. Take 1.744% of $19B, and:

!!!!That means $331.36M of online sales!!!!

Remember this number
Now that we have an estimate for ACI’s online sales based on the broader industry trends, lets come up with an estimate using only company data:
On their last earnings call, management noted that online sales had grown 83% in 2018, 39% in 2019, +278% in the first 12-weeks of 2020, and +243% in April (Remember this number too!). Can you hear your Robinhood account balance going brrrrr? If not, the oven is about to get turned up faster Jerome can print a milli:
Math time!
· ACI did ~$265.4M in online sales in 2018.
Source: https://www.digitalcommerce360.com/2019/11/04/albertsons-embraces-omnichannel-retail/#:~:text=Albertsons%20does%20not%20break%20out,%2461%20billion%20in%20total%20revenue.
· That means they did ~370M in online sales in 2019.
· ACI had $62.455B in 2019 revenue.
· Which means 0.59% of their sales were online.
· Working backwards off their Q2’19 revenue of $18.738B, we arrive at $111M in online revenue.
· Let’s be conservative and assume some sequential decline from their April online sales growth (the second number you should have remembered) and put Q2 online sales at +220%.

!!!!That means $355M in online sales!!!!

Remember that first number I told you to keep in mind? $331.36M. Considering entirely different data sets were used to find each number, it may not be so crazy to think it could be a pretty accurate forecast of the online sales when they report earnings.
But since you’re so smart I know you’re on the edge of your seat wondering what that would mean for their total revenue
Let’s take the average of both forecasts, and use $343.18M as our forecast for online revenue. Given online sales were 0.59% of 2019 revenue, it would imply $58.166B in revenue this quarter, compared to the $22.78B street consensus estimate.
Admittedly, online sales staying at .59% is unrealistic due to how many consumers would shop online instead of in the store. Here’s some more math to deduce the new percentage:
· In 2018, 0.44% of their sales were online
· When online sales rose 39% in 2019, the proportion went up to 0.59%
· So a 39% increase in online sales led to a 0.15% greater contribution of online sales to total revenue
· Therefore a 220% increase would mean a 0.345% increase in proportion of online sales, putting them at .935% of total sales

!!!!!That gives us $36.704B in revenue for this past quarter vs a consensus of just under $22.78B. A beat by over 60%!!!!!

If you’re one of the rare autists to realize that revenue is only one half of the earnings equation, and your costs are the equally as important second half:
Let’s go back to our friends at JPM, in a recent research note, after mentioning the foot traffic ACI was taking from KR, they also noted that ACI has superior gross margins to KR, as their stores are strategically located further from aggressively low priced competitors such as Aldi and WalMart. Additionally, they praised ACI’s recent cost savings initiatives that have been underway for some time now, and believe they would lead to some of the best margins in the industry.
So you’re telling me ACI is going to make way more money than anyone expects this quarter, while also having lower costs? That must mean call options are crazy expensive, right?? Wrong. The aforementioned option is trading at just $0.50. That means after earnings when the stock rips to $30, they could be worth $11, does a 2,100% return sound good to you too? And for you especially literate autists, the IV is only 91.61%.

ACI 8/21 $20C

Let’s ride this fucker to the moon

Happy to respond to any questions/comments on sources for some of the data I presented or anything else your autistic brain comes up with regarding ACI
submitted by HumanHorseshoe to wallstreetbets [link] [comments]

My misery can now be your gain - Quick tips from my options trading

Hi Fellow Autists,
I've been trading options (badly) for a few months now and figured I'd put down some of the things I've learned. I've lost a lot of damn money because I didn't know enough but now I've managed to find some stuff that have helped me stop losing money.
MACD - This is your best damn friend on determining Up / Down swings in a stock. Use this across different charts (1 min, 5 min, 10 min etc) to see which direction a stock is moving. See more here: https://school.stockcharts.com/doku.php?id=technical_indicators:moving_average_convergence_divergence_macd
tl;dr - If the 2 lines cross that means the stock is shifting direction in the time interval you have selected. (Do NOT just depend on the 1 min chart unless you're day trading)
Bollinger Bands - This will overlay a "blob" over your chart that shows a moving "Resistance / Support" window for the stock. If a candle on the chart pops out of the bubble in a direction that may indicate the stock will move in that direction. There are a number of different known "patterns" for the BB that you can watch for that can signal a specific shift in the stock. See more here:
https://school.stockcharts.com/doku.php?id=technical_indicators:bollinger_bands
Quick BB Patterns chart - https://i.redd.it/u7pxhg28lszy.png
RSI - Here if a stock is ~70 and the end of the chart is pointing down the stock should start heading down. If it is at ~30 and the end of the chart starts pointing up the stock should start heading up.
Use all of these together to help determine up / down trends




tl;dr - DO NOT FUCKING BREAK THE SPREAD!



tl;dr - Price only moves so much in a day, get gains GTFO.

https://www.newyorkfed.org/markets/domestic-market-operations/monetary-policy-implementation/repo-reverse-repo-agreements/repurchase-agreement-operational-details

I doubt most of you will read this but if you did I hope some of this information helps save / make you some money. Good luck you autists!
submitted by enfiniti27 to wallstreetbets [link] [comments]

How the TFSA works

(Updated August 9th, 2020)

Background


You may have heard about off-shore tax havens of questionable legality where wealthy people invest their money in legal "grey zones" and don't pay any tax, as featured for example, in Netflix's drama, The Laundromat.

The reality is that the Government of Canada offers 100% tax-free investing throughout your life, with unlimited withdrawals of your contributions and profits, and no limits on how much you can make tax-free. There is also nothing to report to the Canada Revenue Agency. Although Britain has a comparable program, Canada is the only country in the world that offers tax-free investing with this level of power and flexibility.

Thank you fellow Redditors for the wonderful Gold Award and Today I Learned Award!

(Unrelated but Important Note: I put a link at the bottom for my margin account explainer. Many people are interested in margin trading but don't understand the math behind margin accounts and cannot find an explanation. If you want to do margin, but don't know how, click on the link.)

As a Gen-Xer, I wrote this post with Millennials in mind, many of whom are getting interested in investing in ETFs, individual stocks, and also my personal favourite, options. Your generation is uniquely positioned to take advantage of this extremely powerful program at a relatively young age. But whether you're in your 20's or your 90's, read on!

Are TFSAs important? In 2020 Canadians have almost 1 trillion dollars saved up in their TFSAs, so if that doesn't prove that pennies add up to dollars, I don't know what does. The TFSA truly is the Great Canadian Tax Shelter.

I will periodically be checking this and adding issues as they arise, to this post. I really appreciate that people are finding this useful. As this post is now fairly complete from a basic mechanics point of view, and some questions are already answered in this post, please be advised that at this stage I cannot respond to questions that are already covered here. If I do not respond to your post, check this post as I may have added the answer to the FAQs at the bottom.

How to Invest in Stocks


A lot of people get really excited - for good reason - when they discover that the TFSA allows you to invest in stocks, tax free. I get questions about which stocks to buy.

I have made some comments about that throughout this post, however; I can't comprehensively answer that question. Having said that, though, if you're interested in picking your own stocks and want to learn how, I recommmend starting with the following videos:

The first is by Peter Lynch, a famous American investor in the 80's who wrote some well-respected books for the general public, like "One Up on Wall Street." The advice he gives is always valid, always works, and that never changes, even with 2020's technology, companies and AI:

https://www.youtube.com/watch?v=cRMpgaBv-U4&t=2256s


The second is a recording of a university lecture given by investment legend Warren Buffett, who expounds on the same principles:

https://www.youtube.com/watch?v=2MHIcabnjrA

Please note that I have no connection to whomever posted the videos.

Introduction


TFSAs were introduced in 2009 by Stephen Harper's government, to encourage Canadians to save.

The effect of the TFSA is that ordinary Canadians don't pay any income or capital gains tax on their securities investments.

Initial uptake was slow as the contribution rules take some getting used to, but over time the program became a smash hit with Canadians. There are about 20 million Canadians with TFSAs, so the uptake is about 70%- 80% (as you have to be the age of majority in your province/territory to open a TFSA).

Eligibility to Open a TFSA


You must be a Canadian resident with a valid Social Insurance Number to open a TFSA. You must be at the voting age in the province in which you reside in order to open a TFSA, however contribution room begins to accumulate from the year in which you turned 18. You do not have to file a tax return to open a TFSA. You do not need to be a Canadian citizen to open and contribute to a TFSA. No minimum balance is required to open a TFSA.

Where you Can Open a TFSA


There are hundreds of financial institutions in Canada that offer the TFSA. There is only one kind of TFSA; however, different institutions offer a different range of financial products. Here are some examples:


Insurance


Your TFSA may be covered by either CIFP or CDIC insuranceor both. Ask your bank or broker for details.

What You Can Trade and Invest In


You can trade the following:


What You Cannot Trade


You cannot trade:

Again, if it requires a margin account, it's out. You cannot buy on margin in a TFSA. Nothing stopping you from borrowing money from other sources as long as you stay within your contribution limits, but you can't trade on margin in a TFSA. You can of course trade long puts and calls which give you leverage.

Rules for Contribution Room


Starting at 18 you get a certain amount of contribution room.

According to the CRA:
You will accumulate TFSA contribution room for each year even if you do not file an Income Tax and Benefit Return or open a TFSA.
The annual TFSA dollar limit for the years 2009 to 2012 was $5,000.
The annual TFSA dollar limit for the years 2013 and 2014 was $5,500.
The annual TFSA dollar limit for the year 2015 was $10,000.
The annual TFSA dollar limit for the years 2016 to 2018 was $5,500.
The annual TFSA dollar limit for the year 2019 is $6,000.
The TFSA annual room limit will be indexed to inflation and rounded to the nearest $500.
Investment income earned by, and changes in the value of TFSA investments will not affect your TFSA contribution room for the current or future years.

https://www.canada.ca/en/revenue-agency/services/tax/individuals/topics/tax-free-savings-account/contributions.html
If you don't use the room, it accumulates indefinitely.

Trades you make in a TFSA are truly tax free. But you cannot claim the dividend tax credit and you cannot claim losses in a TFSA against capital gains whether inside or outside of the TFSA. So do make money and don't lose money in a TFSA. You are stuck with the 15% withholding tax on U.S. dividend distributions unlike the RRSP, due to U.S. tax rules, but you do not pay any capital gains on sale of U.S. shares.

You can withdraw *both* contributions *and* capital gains, no matter how much, at any time, without penalty. The amount of the withdrawal (contributions+gains) converts into contribution room in the *next* calendar year. So if you put the withdrawn funds back in the same calendar year you take them out, that burns up your total accumulated contribution room to the extent of the amount that you re-contribute in the same calendar year.

Examples


E.g. Say you turned 18 in 2016 in Alberta where the age of majority is 18. It is now sometime in 2020. You have never contributed to a TFSA. You now have $5,500+$5,500+$5,500+$6,000+$6,000 = $28,500 of room in 2020. In 2020 you manage to put $20,000 in to your TFSA and you buy Canadian Megacorp common shares. You now have $8,500 of room remaining in 2020.

Sometime in 2021 - it doesn't matter when in 2021 - your shares go to $100K due to the success of the Canadian Megacorp. You also have $6,000 worth of room for 2021 as set by the government. You therefore have $8,500 carried over from 2020+$6,000 = $14,500 of room in 2021.

In 2021 you sell the shares and pull out the $100K. This amount is tax-free and does not even have to be reported. You can do whatever you want with it.

But: if you put it back in 2021 you will over-contribute by $100,000 - $14,500 = $85,500 and incur a penalty.

But if you wait until 2022 you will have $14,500 unused contribution room carried forward from 2021, another $6,000 for 2022, and $100,000 carried forward from the withdrawal 2021, so in 2022 you will have $14,500+$6,000+$100,000 = $120,500 of contribution room.

This means that if you choose, you can put the $100,000 back in in 2022 tax-free and still have $20,500 left over. If you do not put the money back in 2021, then in 2022 you will have $120,500+$6,000 = $126,500 of contribution room.

There is no age limit on how old you can be to contribute, no limit on how much money you can make in the TFSA, and if you do not use the room it keeps carrying forward forever.

Just remember the following formula:

This year's contribution room = (A) unused contribution room carried forward from last year + (B) contribution room provided by the government for this year + (C) total withdrawals from last year.

EXAMPLE 1:

Say in 2020 you never contributed to a TFSA but you were 18 in 2009.
You have $69,500 of unused room (see above) in 2020 which accumulated from 2009-2020.
In 2020 you contribute $50,000, leaving $19,500 contribution room unused for 2020. You buy $50,000 worth of stock. The next day, also in 2020, the stock doubles and it's worth $100,000. Also in 2020 you sell the stock and withdraw $100,000, tax-free.

You continue to trade stocks within your TFSA, and hopefully grow your TFSA in 2020, but you make no further contributions or withdrawals in 2020.


The question is, How much room will you have in 2021?
Answer: In the year 2021, the following applies:
(A) Unused contribution room carried forward from last year, 2020: $19,500
(B) Contribution room provided by government for this year, 2021: $6,000
(C) Total withdrawals from last year, 2020: $100,000

Total contribution room for 2021 = $19,500+6,000+100,000 = $125,500.

EXAMPLE 2:
Say between 2020 and 2021 you decided to buy a tax-free car (well you're still stuck with the GST/PST/HST/QST but you get the picture) so you went to the dealer and spent $25,000 of the $100,000 you withdrew in 2020. You now have a car and $75,000 still burning a hole in your pocket. Say in early 2021 you re-contribute the $75,000 you still have left over, to your TFSA. However, in mid-2021 you suddenly need $75,000 because of an emergency so you pull the $75,000 back out. But then a few weeks later, it turns out that for whatever reason you don't need it after all so you decide to put the $75,000 back into the TFSA, also in 2021. You continue to trade inside your TFSA but make no further withdrawals or contributions.

How much room will you have in 2022?
Answer: In the year 2022, the following applies:

(A) Unused contribution room carried forward from last year, 2021: $125,500 - $75,000 - $75,000 = -$24,500.

Already you have a problem. You have over-contributed in 2021. You will be assessed a penalty on the over-contribution! (penalty = 1% a month).

But if you waited until 2022 to re-contribute the $75,000 you pulled out for the emergency.....

In the year 2022, the following would apply:
(A) Unused contribution room carried forward from last year, 2021: $125,500 -$75,000 =$50,500.
(B) Contribution room provided by government for this year, 2022: $6,000
(C) Total withdrawals from last year, 2020: $75,000

Total contribution room for 2022 = $50,500 + $6,000 + $75,000 = $131,500.
...And...re-contributing that $75,000 that was left over from your 2021 emergency that didn't materialize, you still have $131,500-$75,000 = $56,500 of contribution room left in 2022.

For a more comprehensive discussion, please see the CRA info link below.

FAQs That Have Arisen in the Discussion and Other Potential Questions:



  1. Equity and ETF/ETN Options in a TFSA: can I get leverage? Yes. You can buy puts and calls in your TFSA and you only need to have the cash to pay the premium and broker commissions. Example: if XYZ is trading at $70, and you want to buy the $90 call with 6 months to expiration, and the call is trading at $2.50, you only need to have $250 in your account, per option contract, and if you are dealing with BMO IL for example you need $9.95 + $1.25/contract which is what they charge in commission. Of course, any profits on closing your position are tax-free. You only need the full value of the strike in your account if you want to exercise your option instead of selling it. Please note: this is not meant to be an options tutorial; see the Montreal Exchange's Equity Options Reference Manual if you have questions on how options work.
  2. Equity and ETF/ETN Options in a TFSA: what is ok and not ok? Long puts and calls are allowed. Covered calls are allowed, but cash-secured puts are not allowed. All other option trades are also not allowed. Basically the rule is, if the trade is not a covered call and it either requires being short an option or short the stock, you can't do it in a TFSA.
  3. Live in a province where the voting age is 19 so I can't open a TFSA until I'm 19, when does my contribution room begin? Your contribution room begins to accumulate at 18, so if you live in province where the age of majority is 19, you'll get the room carried forward from the year you turned 18.
  4. If I turn 18 on December 31, do I get the contribution room just for that day or for the whole year? The whole year.
  5. Do commissions paid on share transactions count as withdrawals? Unfortunately, no. If you contribute $2,000 cash and you buy $1,975 worth of stock and pay $25 in commission, the $25 does not count as a withdrawal. It is the same as if you lost money in the TFSA.
  6. How much room do I have? If your broker records are complete, you can do a spreadsheet. The other thing you can do is call the CRA and they will tell you.
  7. TFSATFSA direct transfer from one institution to another: this has no impact on your contributions or withdrawals as it counts as neither.
  8. More than 1 TFSA: you can have as many as you want but your total contribution room does not increase or decrease depending on how many accounts you have.
  9. Withdrawals that convert into contribution room in the next year. Do they carry forward indefinitely if not used in the next year? Answer :yes.
  10. Do I have to declare my profits, withdrawals and contributions? No. Your bank or broker interfaces directly with the CRA on this. There are no declarations to make.
  11. Risky investments - smart? In a TFSA you want always to make money, because you pay no tax, and you want never to lose money, because you cannot claim the loss against your income from your job. If in year X you have $5,000 of contribution room and put it into a TFSA and buy Canadian Speculative Corp. and due to the failure of the Canadian Speculative Corp. it goes to zero, two things happen. One, you burn up that contribution room and you have to wait until next year for the government to give you more room. Two, you can't claim the $5,000 loss against your employment income or investment income or capital gains like you could in a non-registered account. So remember Buffett's rule #1: Do not lose money. Rule #2 being don't forget the first rule. TFSA's are absolutely tailor-made for Graham-Buffett value investing or for diversified ETF or mutual fund investing, but you don't want to buy a lot of small specs because you don't get the tax loss.
  12. Moving to/from Canada/residency. You must be a resident of Canada and 18 years old with a valid SIN to open a TFSA. Consult your tax advisor on whether your circumstances make you a resident for tax purposes. Since 2009, your TFSA contribution room accumulates every year, if at any time in the calendar year you are 18 years of age or older and a resident of Canada. Note: If you move to another country, you can STILL trade your TFSA online from your other country and keep making money within the account tax-free. You can withdraw money and Canada will not tax you. But you have to get tax advice in your country as to what they do. There restrictions on contributions for non-residents. See "non residents of Canada:" https://www.canada.ca/content/dam/cra-arc/formspubs/pub/rc4466/rc4466-19e.pdf
  13. The U.S. withholding tax. Dividends paid by U.S.-domiciled companies are subject to a 15% U.S. withholding tax. Your broker does this automatically at the time of the dividend payment. So if your stock pays a $100 USD dividend, you only get $85 USD in your broker account and in your statement the broker will have a note saying 15% U.S. withholding tax. I do not know under what circumstances if any it is possible to get the withheld amount. Normally it is not, but consult a tax professional.
  14. The U.S. withholding tax does not apply to capital gains. So if you buy $5,000 USD worth of Apple and sell it for $7,000 USD, you get the full $2,000 USD gain automatically.
  15. Tax-Free Leverage. Leverage in the TFSA is effectively equal to your tax rate * the capital gains inclusion rate because you're not paying tax. So if you're paying 25% on average in income tax, and the capital gains contribution rate is 50%, the TFSA is like having 12.5%, no margin call leverage costing you 0% and that also doesn't magnify your losses.
  16. Margin accounts. These accounts allow you to borrow money from your broker to buy stocks. TFSAs are not margin accounts. Nothing stopping you from borrowing from other sources (such as borrowing cash against your stocks in an actual margin account, or borrowing cash against your house in a HELOC or borrowing cash against your promise to pay it back as in a personal LOC) to fund a TFSA if that is your decision, bearing in mind the risks, but a TFSA is not a margin account. Consider options if you want leverage that you can use in a TFSA, without borrowing money.
  17. Dividend Tax Credit on Canadian Companies. Remember, dividends paid into the TFSA are not eligible to be claimed for the credit, on the rationale that you already got a tax break.
  18. FX risk. The CRA allows you to contribute and withdraw foreign currency from the TFSA but the contribution/withdrawal accounting is done in CAD. So if you contribute $10,000 USD into your TFSA and withdraw $15,000 USD, and the CAD is trading at 70 cents USD when you contribute and $80 cents USD when you withdraw, the CRA will treat it as if you contributed $14,285.71 CAD and withdrew $18,75.00 CAD.
  19. OTC (over-the-counter stocks). You can only buy stocks if they are listed on an approved exchange ("approved exchange" = TSX, TSX-V, NYSE, NASDAQ and about 25 or so others). The U.S. pink sheets "over-the-counter" market is an example of a place where you can buy stocks, that is not an approved exchange, therefore you can't buy these penny stocks. I have however read that the CRA make an exception for a stock traded over the counter if it has a dual listing on an approved exchange. You should check that with a tax lawyer or accountant though.
  20. The RRSP. This is another great tax shelter. Tax shelters in Canada are either deferrals or in a few cases - such as the TFSA - outright tax breaks, The RRSP is an example of a deferral. The RRSP allows you to deduct your contributions from your income, which the TFSA does not allow. This deduction is a huge advantage if you earn a lot of money. The RRSP has tax consequences for withdrawing money whereas the TFSA does not. Withdrawals from the RRSP are taxable whereas they are obviously not in a TFSA. You probably want to start out with a TFSA and maintain and grow that all your life. It is a good idea to start contributing to an RRSP when you start working because you get the tax deduction, and then you can use the amount of the deduction to contribute to your TFSA. There are certain rules that claw back your annual contribution room into an RRSP if you contribute to a pension. See your tax advisor.
  21. Pensions. If I contribute to a pension does that claw back my TFSA contribution room or otherwise affect my TFSA in any way? Answer: No.
  22. The $10K contribution limit for 2015. This was PM Harper's pledge. In 2015 the Conservative government changed the rules to make the annual government allowance $10,000 per year forever. Note: withdrawals still converted into contribution room in the following year - that did not change. When the Liberals came into power they switched the program back for 2016 to the original Harper rules and have kept the original Harper rules since then. That is why there is the $10,000 anomaly of 2015. The original Harper rules (which, again, are in effect now) called for $500 increments to the annual government allowance as and when required to keep up with inflation, based on the BofC's Consumer Price Index (CPI). Under the new Harper rules, it would have been $10,000 flat forever. Which you prefer depends on your politics but the TFSA program is massively popular with Canadians. Assuming 1.6% annual CPI inflation then the annual contribution room will hit $10,000 in 2052 under the present rules. Note: the Bank of Canada does an excellent and informative job of explaining inflation and the CPI at their website.
  23. Losses in a TFSA - you cannot claim a loss in a TFSA against income. So in a TFSA you always want to make money and never want to lose money. A few ppl here have asked if you are losing money on your position in a TFSA can you transfer it in-kind to a cash account and claim the loss. I would expect no as I cannot see how in view of the fact that TFSA losses can't be claimed, that the adjusted cost base would somehow be the cost paid in the TFSA. But I'm not a tax lawyeaccountant. You should consult a tax professional.
  24. Transfers in-kind to the TFSA and the the superficial loss rule. You can transfer securities (shares etc.) "in-kind," meaning, directly, from an unregistered account to the TFSA. If you do that, the CRA considers that you "disposed" of, meaning, equivalent to having sold, the shares in the unregistered account and then re-purchased them at the same price in the TFSA. The CRA considers that you did this even though the broker transfers the shares directly in the the TFSA. The superficial loss rule, which means that you cannot claim a loss for a security re-purchased within 30 days of sale, applies. So if you buy something for $20 in your unregistered account, and it's trading for $25 when you transfer it in-kind into the TFSA, then you have a deemed disposition with a capital gain of $5. But it doesn't work the other way around due to the superficial loss rule. If you buy it for $20 in the unregistered account, and it's trading at $15 when you transfer it in-kind into the TFSA, the superficial loss rule prevents you from claiming the loss because it is treated as having been sold in the unregistered account and immediately bought back in the TFSA.
  25. Day trading/swing trading. It is possible for the CRA to try to tax your TFSA on the basis of "advantage." The one reported decision I'm aware of (emphasis on I'm aware of) is from B.C. where a woman was doing "swap transactions" in her TFSA which were not explicitly disallowed but the court rules that they were an "advantage" in certain years and liable to taxation. Swaps were subsequently banned. I'm not sure what a swap is exactly but it's not that someone who is simply making contributions according to the above rules would run afoul of. The CRA from what I understand doesn't care how much money you make in the TFSA, they care how you made it. So if you're logged on to your broker 40 hours a week and trading all day every day they might take the position that you found a way to work a job 40 hours a week and not pay any tax on the money you make, which they would argue is an "advantage," although there are arguments against that. This is not legal advice, just information.
  26. The U.S. Roth IRA. This is a U.S. retirement savings tax shelter that is superficially similar to the TFSA but it has a number of limitations, including lack of cumulative contribution room, no ability for withdrawals to convert into contribution room in the following year, complex rules on who is eligible to contribute, limits on how much you can invest based on your income, income cutoffs on whether you can even use the Roth IRA at all, age limits that govern when and to what extent you can use it, and strict restrictions on reasons to withdraw funds prior to retirement (withdrawals prior to retirement can only be used to pay for private medical insurance, unpaid medical bills, adoption/childbirth expenses, certain educational expenses). The TFSA is totally unlike the Roth IRA in that it has none of these restrictions, therefore, the Roth IRA is not in any reasonable sense a valid comparison. The TFSA was modeled after the U.K. Investment Savings Account, which is the only comparable program to the TFSA.
  27. The UK Investment Savings Account. This is what the TFSA was based off of. Main difference is that the UK uses a 20,000 pound annual contribution allowance, use-it-or-lose-it. There are several different flavours of ISA, and some do have a limited recontribution feature but not to the extent of the TFSA.
  28. Is it smart to overcontribute to buy a really hot stock and just pay the 1% a month overcontribution penalty? If the CRA believes you made the overcontribution deliberately the penalty is 100% of the gains on the overcontribution, meaning, you can keep the overcontribution, or the loss, but the CRA takes the profit.
  29. Speculative stocks-- are they ok? There is no such thing as a "speculative stock." That term is not used by the CRA. Either the stock trades on an approved exchange or it doesn't. So if a really blue chip stock, the most stable company in the world, trades on an exchange that is not approved, you can't buy it in a TFSA. If a really speculative gold mining stock in Busang, Indonesia that has gone through the roof due to reports of enormous amounts of gold, but their geologist somehow just mysteriously fell out of a helicopter into the jungle and maybe there's no gold there at all, but it trades on an approved exchange, it is fine to buy it in a TFSA. Of course the risk of whether it turns out to be a good investment or not, is on you.
Remember, you're working for your money anyway, so if you can get free money from the government -- you should take it! Follow the rules because Canadians have ended up with a tax bill for not understanding the TFSA rules.
Appreciate the feedback everyone. Glad this basic post has been useful for many. The CRA does a good job of explaining TFSAs in detail at https://www.canada.ca/content/dam/cra-arc/formspubs/pub/rc4466/rc4466-19e.pdf

Unrelated but of Interest: The Margin Account

Note: if you are interested in how margin accounts work, I refer you to my post on margin accounts, where I use a straightforward explanation of the math behind margin accounts to try and give readers the confidence that they understand this powerful leveraging tool.

How Margin Loans Work - a Primer

submitted by KhingoBhingo to CanadianInvestor [link] [comments]

Call of Tendy: Activision Earnings Edition

Activision ($ATVI) is releasing their quarterly earnings on August 4th (8/4). They're up about 30% from their pre-Covid highs, and are currently valued around 10x annual revenue. They crushed their last earnings revenue by 15.30% and EPS by 53.28% which helped them on their run-up to their current levels.
I am now going to convince you why they will smash their earnings again despite their already-inflated revenue projections that price in a coronavirus boost and why you should bet big on them and not miss out on a potential huge play.
Me and one of my friends from school (who is very intelligent) used to roast the shit out of people who buy cosmetic items in-game, like in Call of Duty, and talk about how dumb it is to pay for in-game clout. But during the pandemic, like many people, he's been so fucking bored that he's been playing Call of Duty all day unlocking a bunch of gun camos. The other day, he (embarrassingly) admitted to me that in his pursuit of gun camo unlocking he (shamefully) bought a $10 "battle pass" that would help him unlock more cosmetics. Why not, he is getting paid unemployment + stimulus to sit home on his ass and play Call of Duty, so might as well put a little of that into the game because there's nothing else to buy right now. (Last time I had a moment like this? In early April when one of my much dumber friends asked me with help setting up a Shopify store. I was dumbfounded that he would even be trying to set one up. Since then Shopify is up more than 120%)
Call of Duty Warzone and Call of Duty Modern Warfare are very popular, and just like all those nerds that played Fortnite and forked over tons for skins, there are a plethora of microtransactions that come with it and man do the people that play Warzone specifically everyday take it seriously.
This got me thinking. How many people who never bought microtransactions before have now spent money on them, especially when somebody as resilient to them as my friend have now purchased them? What kind of assumptions can we make about how much bigger the microtransaction market got during the pandemic?
The answer I believe is that because people are playing these games so frequently when they had never done so before, they start to assign more value to their in-game character and want to appear to have more "clout" and seem good at the game. It is this value that somebody assigns to their in-game experience that when high enough drives the user to purchase content for their character and spend real dollars. That coupled with the fact that they get free money from the government while doing nothing makes the target market for these games especially excited to start spending.
But it isn't just that the existing users are spending more - the microtransaction market size is expanding, so much so that my friend who once considered himself way out of the microtransactions market and laughed about ever spending money on shit for a video game decided to spend money on it for the first time. This isn't just a one-off thing I'm noticing with a stupid friend, because he is in fact not stupid, rather it's a psychological effect caused by having way too much time to play video games and stimulus money that Activision's target market doesn't want to spend elsewhere.
According to surveys, in Call of Duty 60% of people purchase downloadable content. In Overwatch, it's 62%. In Hearthstone, it's 71%. In StarCraft, it's 42%. Source: https://venturebeat.com/2019/11/19/arm-treasure-data-the-most-popular-games-arent-necessarily-using-lots-of-microtransactions/ What if in all these games, which are owned by Activision, that percent has risen substantially because so many people have been playing them so often during the pandemic and as a result of the effect I previously described that my friend was victim to? This survey was conducted using people that consider themselves to play video games regularly, meaning people that play pretty much daily. So we have to keep in mind that the population of people that play daily is ALSO increasing because of the pandemic, while the raw % of people that will spend on microtransactions is also increasing.
Well what's the big deal, it's just a few in-game purchases right?
Wrong.
In 2019 Activision pulled in $6.49 billion in revenue. Of this $6.49 billion in revenue, a whopping 50.85% or $3.3 billion came from in-game microtransactions. $3.3 billion in a year for some pixels what the fuck right? And the kicker? There's nearly a 100% profit margin on these microtransactions, which is why last earnings (which ended March 31 and contained what is a decent increase in microtransactions because people hadn't been sitting on their ass for too long yet) Activision reported a 28.24% net margin, up 15.31% YoY.
Last quarter they came in at $1.52 billion in revenue versus the $1.32 billion expected revenue. This earnings report, the consensus revenue estimate is $1.68 billion (representing a whopping 39% YoY growth) which is set nice and high - but I'm going to tell you why this is still going to be beat.
For Q2 of last year, Activision reported $1.21 billion in revenue. Ok, now we're going to do some conservative math, estimate the lower bounds of the earnings, and show why this quarter's earnings will be beat.
Let's assume 0% YoY growth, ignoring the addition to the revenue that games like CoD Warzone had, so they'll be making $1.21 billion as a base like they did in Q2 of last year. Last quarter, microtransactions made up an astounding $956 million of the $1.522 billion in revenue, equaling about 63%, and that was just at the beginning of the pandemic when the I'm-staying-home-so-now-I-value-this-game-more effect that I am describing was just coming into fruition. AND THAT WAS BEFORE STIMULUS CHECKS WERE RECEIVED. Let's be conserative and assume that of that baseline $1.21 billion that we will use to come up with earnings for this quarter, $726 million or about 60% is from microtransactions, even though this % is most likely rising on track with the previous quarter's trend which had 63% of revenue from microtransactions.
Now let's try to estimate what the increase in volume of microtransactions is like if even my friend who was sworn against them played enough to care about cosmetics because he had played the game for long enough. So, not only are we increasing the number of people that want cosmetics and other in-game purchasable items, but also accounting for the fact that the people who already spent a lot on them will now spend more because they play more. This is inclusive of Call of Duty, World of Warcraft, and the Candy Crush Saga which are their big three microtransaction earners. I'm convinced that the volume on these things has to at least have doubled YoY. But for the sake of argument, we'll say they have only increased 75%. Why is this a fair estimate? Last quarter, microtransactions for Modern Warfare were up 100% compared to Black Ops 4 in the same quarter the previous year. We don't want to over-estimate and get our hopes up, we want to make sure this very ballpark math that we are doing can beat revenue estimates even on a considerably lower bound, giving us a high % chance of being right about the actual figure.
To further justify this kind of growth in microtransactions, we're going to look at a few things. This report is for months April, May, and June, meaning last quarter's results ended with March. Here are the latest active player count statistics for Warzone: https://www.statista.com/statistics/1110000/call-of-duty-warzone-players/ As of May, there are 60 million Warzone players - this is where there will be a large number of microtransactions which were barely included in the previous quarter because they had less than 40 million players by the end of March. A large part of last quarter's revenue came from CoD Modern Warfare's (not Warzone) season 1 and 2 in-game purchasable content. According to Google Trends, Season 4, released in June, garnered more interest than any other season: https://trends.google.com/trends/explore?q=modern%20warfare%20season&geo=US Also since last quarter, interest in buying CoD points (their currency) has gone up tremendously: https://trends.google.com/trends/explore?geo=US&q=buy%20cod%20points
So let's take our baseline $1.21 billion assuming 0% YoY growth, and increase the revenue generated by microtransactions by 75%. $1.21 billion + ($726 million * 0.75) = $1.754 billion, beating the $1.68 billion consensus only by factoring in a growth in microtransactions and absolutely nothing else, when in reality up-front game sales (purchasing games online for full price), subscriptions, merchandise, and other revenue streams have also increased. This way, even if we've over-estimated our microtransactions boost, there is more than enough room to still trounce earnings from the added revenue from other streams. And if we were very accurate about the microtransactions boost, then that additional revenue will send us way over. Activision already killed earnings last quarter with barely any money coming in from Warzone. l would not be at all surprised if they reach $2 billion in earnings, representing almost a 20% beat of expectations. At $2 billion per quarter and a 10x revenue valuation, Activision would be valued at $80 billion representing a 30% move.
ACTIVISION IS GOING TO BEAT AN EARNINGS ESTIMATE THAT IS ALREADY HEAVILY ACCOUNTING FOR THEIR CORONA BUMP.
The options are cheap for Activision, so I am loaded up. I think realistically it will have a pre-earnings run up as more people realize that they're going to do very well on earnings and then go up even more on beat earnings. The downside risk on a stock like this is low considering it is a stay-at-home that has had its value increased REASONABLY by the pandemic and is not trading at a ridiculously high tech revenue multiple. At peak rona season, the stock fell roughly 20% and has since rebounded about 56%.
Positions:
ATVI 8/21 90C
ATVI 8/21 100C
My positions:
https://imgur.com/a/CobyxYe
TLDR: Microtransactions made up 63% of Activision's earnings last quarter when they beat revenue estimates by 15.30%. This quarter not only are microtransactions going to make up a larger percentage of the revenue, but the revenue will be much larger with help from the pandemic and the 60m+ new Call of Duty Warzone players. I've also bolded the more important information if you don't want to read through everything.
EDIT: Warzone, like Fortnite, is a free download. A comparable game is Fortnite, which at its peak popularity had a revenue per user of a shocking $96 (Source: https://fortniteintel.com/report-fortnite-is-earning-double-the-revenue-of-google-twitter-snap-and-facebook-per-use9265/ ). If we assume that Warzone has just 1/20th of this revenue per user, we're already at an additional $288 million in revenue from Warzone alone.
submitted by veryhighthinker to wallstreetbets [link] [comments]

Arbitrage opportunities in options - how options are priced, explained in layman's terms - without resorting to the BS pricing model

Arbitrage opportunities in options - how options are priced, explained in layman's terms - without resorting to the BS pricing model
Alright retards, I've been laid off at work due to beervirus and I've been eyeing and toying with the idea to get back into options trading. I'm writing this post to raise the bar for discussion on this sub, I'm tired of seeing just memes. We'll never match WSB unless there is a healthy mix of dankass memes and geniass discussions.
Now, when it comes to options, I am completely self-taught (completely from first principles, back in 2008, before you autists came up with the idea of watching videos on youtube). Since I am completely self-taught, my perspective will be different from the people who learnt this stuff while studying MBA/finance courses/NSE accredited investing courses. So if what I'm saying is different from what you've heard from the dude who swindled you of 20K for two days of options education or your gay BF's live-in partner, remember when it comes to maths, there are many ways of approaching a problem, ultimately, all are the same - profit means account balance goes up, loss means a loss post on ISB goes up.
Now, I'm assuming that you understand how options work. If not, I suggest heading to Zerodha's Varsity to read up on options. If you're too lazy for this, get your micro-dick outta options, this is a man's game, surprise butt-sex awaits amateurs.
I'm also assuming that you've come to realise that the sustainable way to make money in options is to write options. Unless you've got Trump or Ambani on speed dial to get access to news before it becomes news, YOLOing whatever rent money you have on buying options will blow up your account, eventually.
Writing options also means the possibility of account balance going tits up is a real possibility. You gotta, gotta, gotta measure and manage your risk. You can do this only when you understand options as well as your dick.
Towards this, I intend to put up a bunch of posts (depending on many of you shit heads are still reading at this point) that comment about little things that are more of 'wisdom' than 'education'.
The example below talks about currency derivatives. Why currency? Read below:
  • Lower margin needed. I can short a CE/PE contract with only Rs.2000, unlike the >Rs. 70,000 for index contracts. You get to learn, play and wisen up with an order of magnitude less money than with Nifty or Banknifty contracts.
  • More stable underlying. When you're shorting contracts, the last thing you want is the underlying asset going crazy like a broncho during rodeo.
  • Less autistic crowd in the currency market. While banknifty options attract retards like flies to poop, currency derivatives attract a more educated crowd.
  • Sooner or later, you end up acquiring a more balanced education on economics as a whole, rather than the shit fest that goes on in the local circles.
  • The more contracts you can short, the more strategies you can pursue
  • Decent hedging is possible without throwing away all of your potential profits
  • Lesser stress (anybody else going through premature hairloss or is it just me?) because of points outlined above.
Alright, today, I'm going point how the put-call parity works and by extension, show proof for 'efficient markets' by pointing out how opportunities for arbitrage is pretty much non existent, so you guys can cool it with the whole 'market manipulators' knee jerk reaction.
Alright, to start off, here's the current spot rate of the USD-INR pair:
https://preview.redd.it/qup28ay567j51.jpg?width=452&format=pjpg&auto=webp&s=b79ef1a3480e5cbafa42547143c651397ec57f13
Here's today's USD-INR futures closing rate for Sep expiry:
https://preview.redd.it/krghirc677j51.jpg?width=511&format=pjpg&auto=webp&s=60d52b785baa8a1cd240d0df7949a48c8391ba2d
The difference between spot and futures rates is due to differences in what is construed as 'risk-free' interest rates in the US and in India. Check out this video if you want to understand why the Sep futures is trading at a premium of 27 paisa to the spot rate.
Alright, so the deal is, if you buy 1 futures contract @ 74.49, unless the USDINR exchange rate rises by 27 paisa at the end of Sep (i.e. a spot rate of 74.49) you won't make a profit (ignoring brokerage and stuff). If the exchange rate were to remain the same without any change, you stand to lose (0.27 * 1000, currency derivatives have a lot size of 1000) Rs. 270 per lot. Even worse if the rupee were to appreciate (i.e. exchange spot rate goes down).
Now bear with me if the next few paras are exceedingly boorish, I need to spoon feed people who aren't used to currency derivatives. My strategies are mostly aimed at playing a more risk balanced play, something that yields consistent returns which can be compounded. 10% profit compounded monthly gives 314% growth per year, 3.5% profit compounded weekly gives ~600% growth per year.
Given how the USDINR rate is crashing, one way to profit would be to short a futures contract (duh!).
The orange line indicates the current USDINR exchange rate
As indicated above, if the exchange rate does nothing and remains as is till end of Sep, each lot of USDINR futures shorted yields about Rs. 250 in profit (for something that takes up Rs.3000 in margin, that's a >8% profit in return). Things look even better if the exchange rate were to fall further.
The problem is that things heat up quickly if the exchange rate were to go up. Ideally we would want to hedge against it (which also reduces the margin needed drastically). One way to hedge it would be to buy a at-the-money call (74.25CE @ rate of Rs. 0.555 -> Rs. 555 per lot (i.e 0.555*1000)).
https://preview.redd.it/ze16kyphv7j51.jpg?width=588&format=pjpg&auto=webp&s=a3c2bba9fb314beff309671f03a013e69e08f4e0
Having purchased a call option, the P/L curve now looks like:
The max loss is now limited to Rs. 315
The keen-eyed among you will recognise the above P/L curve as one that matches that of a put option. By shorting a futures contract and buying a call option (both with same expiry), we have created a synthetic put option that would have costed us Rs. 315 (0.315*1000) for one lot.
Now, why go through all of this hassle if we can get the same returns by just buying a put option? Makes sense, as long as we can purchase the 74.25 strike put option at a price lesser than Rs. 0.315 (see above).
Let's see what the put options are going for:
Well, how about that...
The market price of 74.25 puts are exactly the same price as our synthetic put. While the synthetic put came in at Rs. 0.315, the put costs another 0.005 extra to avoid the trouble of shorting a futures contract and buying a call at the same time. This is not by chance, big trading desks have algos (trading bots for the virgins here) that keep an eye out for price disparities. In this case, if someone were to be willing to pay more, the algos would compete amongst themselves to sell the puts at any price above 0.32. And if someone were to be willing to sell a put for less than 0.315, the algos would immediately buy.
The price of the puts move in sync with the prices of the futures and call contracts. Conversely, we can create a synthetic call, and you will notice that the price of the synthetic call works out to be the same as the market price for the 74.25 strike call. We can also create a synthetic futures contract the same way.
The prices of derivatives aren't decided willy-nilly. They are precisely calculated at all times, which forms the basis for the best bid/ask prices. There is no room left for someone to come in and make free money via arbitraging using synthetic contracts.
If you found this insightful, and would like more of this sort of posts, let me know.
Options when used properly, can be used to generate risk adjusted returns that are commensurate with the amount of risk you are taking. If you are YOLO-ing, sure, you can double or triple your money, because you can also lose 100% of your margin. Conversely, you can aim for small, steady returns and compound the crap out of them. Play the long game, don't be penny wise and pound foolish.
submitted by circuit_brain to IndianStreetBets [link] [comments]

Unpopular FIRE opinions that allowed me to FIRE

I realize most of my posts get down voted into oblivion anyway, but I'm ready to embrace that. Much of the reason for "hate" is that I've done things a little (or a lot) unconventionally. Not because I was being contrarian, but because I was already an early retiree long before I discover there was such a thing as FIRE, JL Collins, MMM, Vicki Robbin, etc. In some ways I'm glad for this, because I might not have been able to retire as early as I did by following the conventional wisdom. In other ways, it would have made things much easier by having all that collective knowledge to draw from. The point of this post isn't only to share it is okay to do things your own way from time to time, but to encourage discussion in the comments about things you do that are not kosher in the FIRE world.
My major mistakes that I wish I had a do over on....
1) When I first began investing in stocks, to my knowledge ETFs didn't exist. This was in the 80s when things were handled by telephone transaction to a shady guy who promised you he knew a lot of secret knowledge. I was young and stupid and let one of these guys handle my investments. To this day I don't know what happened to him or my stocks. My next attempt was in the mid 90s when computers were more common and I could take control of my own stock picks through a new platform called Sharebuilder. I did my best, but I'll never really know for sure how I did compared to an index. I subscribed to the Motley Fool Hidden Gems letter and bought everything they recommended along with my own picks. Some did well, some went to zero, some traded flat. To sum up, my early years of investing in the stock market were pretty much a mess.
2) I didn't take advantage of a free higher education. Between my athletic skill and my high academic scores I had a chance to go to college completely free...and when I say free...I mean the 100% full ride of all school fees, meals, housing, etc. But I also have social anxiety. I had attended one rural school my entire life with people I had known since K. The new environment was so stressful for me I stopped attending classes and dropped out my first year.
3) I was underemployed most of my life when working for others or struggling to start my own business. I ended up with a food service job (high end, for the most part) that I did really well at. I was given all sorts of managerial responsibilities. I never asked for raises or official promotions, so allowed myself to be very under paid for the work I was doing. My priorities were elsewhere at the time as by that time I was in a band...this kind of became a theme for my early adult life. My creative projects were more important than my income. Even my entrepreneurial leanings (of which there were several projects) were all about creativity first, making money second. Not sure I really regret that though.
Things I'm glad I did unconventionally....
1) Started buying houses in cash. (a huge no no to most people!) I cashed out most of those stocks I mentioned above to start buying houses. (what? you're risking your future!) In cash. In a LCOL area, of course. I bought fixer uppers with absolutely no background in real estate. I hired people to do the work...and learned everything I could on my first few projects. Luckily I'm good with numbers, and I also seemed to have a knack to find undervalued houses with good bones that made ridiculous rental returns after being fixed up. This soon funded itself from the rental income and I was able to grow fairly quickly. That wouldn't have happened if I had listened to what I now know is the conventional wisdom. Would I advise others follow that path. No...not unless they had a similar market to invest in. Trying to repeat this in some areas of the country would not only hurt your returns, it could lead to financial suicide.
2) I set out to find the optimal way to invest in the stock market FOR MY SITUATION. The rentals provide me a steady income, so I knew I could take extra risk in my stocks. After tons of research I discovered the optimal return for me would be based on high dividend stocks in combination with leveraged index funds. I know, I know. I know all the arguments about dividends. For the most part they are true during the accumulation phase. What is often not discussed is everything changes during the draw down period. Dividends lessen your sequence of returns risk since you don't have to sell into down markets to still get income. Sometimes a $1 is not $1 when it cripples future potential returns. There are research papers that go into this in detail, but the math is solid. And I also know leverage index ETFs are poison to many. DECAY! Yet the few papers that address this in real back testing rather than theory show leverage outperforms by a significant margin over most market cycles. Long term, this really adds up. Does this mean I advocate for other people to do what I am doing. NO! Don't do it. I wouldn't be doing it if I didn't have secure income to last me well past my death. My stock accounts will be going to fund charities after I die, so I do want them to do well, but if they don't, it won't have any impact on my retirement. While my exact mix does extremely well in back testing, anything can happen.
3) I live an extremely frugal life. I spend only $10k per year for the last several years, which is well below poverty levels. This doesn't mean my life in reality is impoverished...my house is paid for, my cars are paid for, etc...and I've found ways to monetize many things that cost a lot of people money. That doesn't change the fact that I KNOW many people would not be happy living the way I live. They would be miserable. I am not, so it works for me. I enjoy the "game" of frugality and low waste while still living a very fulfilling life.
4) I don't have insurance. I carry only the minimums I'm forced to carry on things. Other than that, I try to self insure. I fully understand why most people think I'm an idiot when it comes to this. My argument is that I can set that money aside and insure myself rather than having huge portions of that go to pay for the infrastructure of the insurance companies. In theory, if I'm a healthy adult with deep pockets paying out of pocket should be cheaper in the long run. If not, insurance companies wouldn't be making money. Same reason I don't buy the extended warranty on electronics or other items. Again...I know the other argument, and it is also valid. I don't want to argue the point in the comments because I have discussed this topic to death elsewhere in other posts.
5) I don't have children and don't plan to have children. You do you. If children bring you joy...well, enjoy! I don't hate children. It is just part of my personal philosophy to not bring more life into this world. Long story, not easily summed up in a post like this, so I'll leave it at that.
6) I invest a substantial amount in a relatively new platform. (Fundrise) My risk tolerance in this sort of investment is high (much like my stock portfolio) and it gives me diversity outside the stock market and my local real estate market. I don't think the platform will fail, but it is technically possible. As with everything else on this list, I don't recommend others do it if it isn't money they can stand to lose. This is another investment that will fund a charity some day.
7) I didn't want to list everything in detail, but there are many other things I do that falls outside of the conventional FIRE wisdom. I'm sure I've touched on some of these in the past, and this post is already long. Very long. IF you made it this far, congrats.
So...that is the silly things and maybe a few wise things I do to buck the standard advice. I'd love to hear from others the things they do that don't conform to typical FIRE norms. As always, I'm an open book so feel free to ask questions or tell me how stupid I am!
submitted by AccidentalFIRE to financialindependence [link] [comments]

Singapore is a Meritocracy* [EXTRA LONG POST]

Singapore is a Meritocracy* [EXTRA LONG POST]
Edit: Thank you for all the comments and chat messages! I'm trying to go through each one. Writing thoughtful comments in the midst of having a full-time job is HARD WORK. I think I've missed a few questions, drop me a message if you're interested in continuing a discussion, I'm open to listening! There has been a lot of good comments, a few with great perspectives, and now I have a whole lot of things to read up on.
---
Now that the 2020 General Election is firmly in our rear-view mirror, there is something that I have been meaning to write about: institutionalized racism affecting the minorities, especially the Malays, in Singapore. If you are groaning at this thinking you have been misled by this post’s title, I assure you that by the end of this post you will understand the caveat behind the above-mentioned title. I plead for a little of your time and patience.
We have seen many discussions online about majority privilege and systemic racism impacting the minorities. Many of you may have even participated in some of these discussions. I will not try to explain those terms for they have already been repeatedly debated to death. What this post aims to achieve is to bring to light Singapore’s history and government policies that have either benefited the majority race or kneecapped the minority race. Or both.
Why am I doing this?
It is frustrating to see some Singaporeans fully buying into the narrative that Singapore is a truly meritocratic society; that the government’s policies do not discriminate against minorities, or if a Singaporean worked hard enough he or she will succeed (whatever the definition of success is), or that we have anti-discriminatory laws that protect the minorities. Some even claim that the Malays enjoy special privileges due to Section 152 of the Constitution describing the special position of Malays, and that the Malays are blessed with free education in Singapore.
Section 152, “Special Position”, free education for all Malays?
Minorities and special position of Malays
152.—(1) It shall be the responsibility of the Government constantly to care for the interests of the racial and religious minorities in Singapore.
(2) The Government shall exercise its functions in such manner as to recognise the special position of the Malays, who are the indigenous people of Singapore, and accordingly it shall be the responsibility of the Government to protect, safeguard, support, foster and promote their political, educational, religious, economic, social and cultural interests and the Malay language.
The oft-mentioned Section 152 of the Constitution was an administrative continuation of previously existing colonial policy towards the Malays [Col: 126]. Regardless of the “special position” of the Malays, the only form of assistance rendered to the Malays was the policy of free education for all Malay students. This minimal approach of the government did little to improve the educational and socio-economic standing of the Malays as revealed by the 1980 national census. The free tertiary education policy was ultimately removed in 1990, despite opposition from Malays who questioned the constitutionality of its removal [col: 126].
With free education for all Malays, why haven’t their socio-economic and educational standings improved?
There are many factors to look at, and the issue goes way back to the colonial era so that’s where we shall start. The colonial administrators of Singapore, in their pursuit of capitalistic gains, had little use for the native inhabitants. The natives who were already living off their own land had no desire to work for the British as labourers. The British saw this unwillingness to work for them as indolence, and ascribed many other negative cultural stereotypes to the locals [pdf]. Nailing home the capitalistic intent of colonial presence in Singapore, the British Director of Education R. O. Winstedt explained their policy for education for the natives in 1920 [pg. 2]:
"The aim of the government is not to turn out a few well-educated youths, nor a number of less well-educated boys; rather it is to improve the bulk of the people, and to make the son of a fisherman or a peasant a more intelligent fisherman or peasant than his father had been, and a man whose education will enable him to understand how his lot in life fits in with the scheme of life around him".
And in 1915, a British resident revealed the colonial attitude towards education [pg. 3]:
"The great object of education is to train a man to make a living.... you can teach Malays so that they do not lose their skill and craft in fishing and jungle work. Teach them the dignity of manual labour, so that they do not all become krannies (clerks) and I am sure you will not have the trouble which has arisen in India through over education"
The type and quality of education that the British set up for the native inhabitants show that they had no intentions to empower the locals with skills for a new economy. The education provided, while free, was to make sure the locals were kept out of trouble for the British, and remain subservient to the colonial causes. Further impeding the socio-economic status of Malays, the British actively discouraged Malays in switching from agricultural production to more lucrative cash crops, preventing the building of wealth among the Malay communities (Shahruddin Ma’arof, 1988: 51). In contrast to the British suppression of the buildup of Malay wealth and provision of vernacular education, Chinese businessmen, clan associations and Christian missionaries established Chinese schools where students were taught skills like letter-writing and the use of the abacus. By the turn of the 20th century, the curriculum in these Chinese-language schools expanded to include arithmetic, science, history and geography while Malay-language schools under Winstedt’s educational policies focused on vernacular subjects such as basket-weaving.
So, when Singapore attained self-governance, did things get better?
Discontent with the education system and social inequalities was already a big issue in the mid 1950s that the parties that contested for the Legislative Assembly championed for reforms to social issues like better education systems, housing subsidies and workers rights.
The People’s Action Party (PAP) won the 1959 Legislative Assembly general elections by running on a rather progressive platform of low-cost housing, improvement of employment opportunities for locals and a stronger education. They also campaigned for abolishing the inequality of wealth in their election manifesto (Petir, 1958: 2), with PAP chairman Dr Toh Chin Chye expressing his disgust at seeing “so many of our people reduced to living like animals because under the present social and economic system, the good things of life are for the ruthless few, those who believe that the poor and the humble are despicable failures.”
With the PAP in power, assurances were made to Singaporeans that no community would be left behind. In 1965, Prime Minister Lee Kuan Yew promised aid specifically to help raise the economic and education levels of the Malays. In 1967 during a mass rally at Geylang Serai, PM Lee again promised that “the Government with the support of the non-Malays are prepared to concentrate more than the average share of our resources on our Malay citizens [pdf].” He emphasized the importance of lifting all sections of the community to an even footing, reasoning that “if one section of the community were to lag behind it would harm the unity and integrity of the nation” (Bedlington, 1974: 289).
Despite these promises to help the minorities narrow the inequality gap, very little was done to realize it. Instead, the government took a ruthless approach towards economic growth, sparing no expense. Deputy Prime Minister Goh Keng Swee explained the government’s main concern was “to generate fast economic growth by any and every possible means. . . . If unequal distribution of income induced greater savings and investment . . . then this must be accepted as the price of fighting unemployment.” (Goh, 1972: 275)
By the late 1970s, a strong shift in parents’ preference towards an English-medium education for their children had resulted in a rapid decline in the number of vernacular schools.
Throughout the 1960s and 1970s, there was a shift of parents’ preference towards educating their child in the English stream. This shift, together with a period of minimal intervention in terms of educational policy and assistance to the minorities by the government, caused the number of enrolments in vernacular schools to rapidly decline. The socio-economic gap also widened between the Malays and Chinese, as the Chinese community enjoyed greater occupational mobility relative to the minorities. This can be seen in the shift in the lower manual occupation category, from a relatively equal proportion in 1957 to a 10 percent difference in 1980 [Table A]. In 1980, the average Malay household income was only 73.8 percent of the average Chinese household income. The income gap widened considerably by 1990, where the average Malay household income dropped to 69.8 percent of the average Chinese household income [Table B] (Rahim, 1998: 19-22). Decades after the lofty promises were made by the government, the Malay community’s slide into marginality continued.
Table A

Table B
Wait, the gap got bigger? Did the government do anything?
In 1979, Education Minister Dr Goh Keng Swee with the Education Study Team released a report on the Ministry of Education, more widely known as the Goh Report. The team was made up of 13 members, most of them systems analysts and economists, and none of whom ‘possess much knowledge or expertise on education’ (Goh Report, 1979: 1). The all-Chinese team excluded social scientists and educationalists, as the Education Minister had little regard for their expertise (Rahim, 1998: 121). The Goh Report made recommendations for radical changes to the educational system, recommendations which then became the basis of the New Education System (NES).
During a time when Tamil, Malay and Chinese schools were getting closed down due to declining enrolment numbers due to the popularity of English medium ones, the Special Assistance Plan (SAP) was introduced in 1978 to preserve and develop nine Chinese schools into bilingual (Mandarin and English) schools while retaining the values and traditions of a Chinese school. As part of the NES, these schools were to be the only ones to offer the Special course which the top 10 percent scorers of the PSLE are eligible to opt for. With these schools getting more resources, better facilities and the best teachers, the SAP contradicts the multi-racial principle of giving equal treatment to the non-English language streams. This exclusivity and the elite status of SAP schools affords its students better opportunities and advantages that are virtually out of reach for many minorities in Singapore. Effectively, the SAP is an institutionalized form of ethnic/cultural favouritism (Rahim, 1998: 130)
The NES also introduced early streaming for students which further exacerbated existing inequalities. Despite primary school education being free for all Singaporeans, families with better financial means have a huge advantage in preparing their child for streaming through additional tuition and better preschool choices#. (Barr & Low, 2005: 177) As we have seen from the disparity in household incomes between the Chinese and Malays, early streaming served to widen the gap between the haves and have-nots. The have-nots, more often than not, find themselves in the lower streams, trapped with very limited options providing upward social mobility. They will have to face an insurmountable task to lift themselves and their future generations out of their current predicament.
In 1982, the PAP slogan “a more just and equal society” was quietly dropped from the party’s constitution. This signaled an end to the socialist ideals that the party built its identity upon.
Why? It can’t be that the government favours one race over another...can it?
Examining the PAP leadership’s attitude towards the different cultures and ethnicities is key to understanding what the government values and how these values shaped its policies. Prime Minister Lee Kuan Yew, as quoted in the Goh Report, extolled the values of East Asian philosophies: "The greatest value in the teaching and learning of Chinese is in the transmission of the norms of social or moral behaviour. This means principally Confucianist beliefs and ideas, of man [sic], society and the state" (Goh, 1979: v). The government’s championing of SAP schools and ‘Chinese values’ is also complemented by the launch of ‘Speak Mandarin Campaign’ in 1979.
In 1991, Prime Minister Goh Chok Tong espoused similar values as his predecessor, praising the virtues of ‘Confucian dynamism’ and claiming that Singapore would not be able to thrive and prosper without the Confucian core values of thrift, hard work and group cohesion. The fear of erosion of the Chinese cultural identity was never matched with a similar concern for the erosion of minority cultural identities, where the minorities were “expected to submit to a form of partial or incomplete assimilation into a Chinese-generated, Chinese-dominated society.#” (Barr & Low, 2005: 167)
On top of favouring Chinese cultural values and identities, the PAP leadership associated the cultures of the minorities with negative connotations. Speaking about a Malay who did well in business, Senior Minister Lee Kuan Yew described the man as “acting just like a Chinese. You know, he’s bouncing around, running around, to-ing and fro-ing. In the old culture, he would not be doing that” (Han, et al., 1998: 184). In a Straits Times article on 26 June 1992, SM Lee also implied that the Chinese are inherently better at Maths, and that "If you pretend that the problem does not exist, and that in fact (the Malays) can score as well as the Chinese in Maths, then you have created yourself an enormous myth which you will be stuck with.+"
These attitudes from the ruling elite translated into more policies that preserved the advantage of the majority. When faced with the “pressing national problem”* of a declining birth-rate of the Chinese, the government took steps to ensure Chinese numerical dominance in Singapore. The Singapore government encouraged the immigration of skilled workers from countries like Hong Kong, Korea, and Macau, countries which were accorded the status of ‘traditional sources’ of foreign labour (Rahim, 1998: 72). Meanwhile, showing the government’s preference and/or dislike for specific groups of people, Malaysian Malays faced great difficulty in getting work permits. (“‘Harder’ for bumiputras to get S’pore work permits.+”, The Straits Times, 7 Mar 1991)
Another policy which worked to preserve the advantage of the majority was the urban resettlement programmes of the 1960s and 1970s. This resulted in the dissolution of the Malay electoral strongholds in the east, undermining the organic growth of Malay political grassroots. When it became apparent in the 1980s that the Malays were moving back to the traditional Malay residential areas, an ethnic residential quota, labelled the Ethnic Integration Policy, was implemented. The rationale behind the quota was to ensure a balanced racial mix, purportedly for racial harmony. However, this rationale does not stand up to scrutiny in the face of numerous academic studies on interethnic urban attitudes and relations**. Another consequence of the policy is the reinforcement of racial segregation when taking into account the income disparity between the races. Underlining the weakness of the government’s reasoning, constituencies like Hougang were allowed to remain Chinese residential enclaves despite its population being approximately 80 percent Chinese. (Rahim, 1998: 73-77)
Perhaps the most controversial policy introduced was the Graduate Mothers Scheme. It was introduced in 1983 to reverse the trend of falling fertility rates of graduate women versus the rising birth-rate of non-graduate women***. In a push to encourage graduate mothers to get married and have children, Deputy Prime Minister Dr Goh Keng Swee unveiled a suite of incentives; all-expenses paid love-boat cruises for eligible graduate singles in the civil service, a computer dating service, fiscal incentives, and special admissions to National University of Singapore (NUS) to even out the male-female student ratio#. At the other end of the spectrum, lesser-educated women were encouraged to have smaller families in a scheme called the Small Family Incentive Scheme. This was achieved by paying out a housing grant worth S$10,000 to women who were able to meet the following set of conditions: be below 30 years of age, have two or less children, educational level not beyond secondary school, have a household income totalling not more than S$1,500 and willing to be sterilized#.
Based on the average household income statistics, a simple deduction could be made that those eligible for the sterilization programme were disproportionately from the minority communities.
Isn’t that eugenics?
Yes. Singapore had a government-established Eugenics Board.
The graduate mothers and sterilization programmes were greatly unpopular and were ultimately abandoned or modified after the PAP’s mandate took a 12.9 percent hit in the 1984 general election. However that did not mean that eugenics stopped being an influence in policy-making.
In his 1983 National Day address, PM Lee stated that when it comes to intelligence, “80 per cent is nature, or inherited, and 20 per cent the differences from different environments and upbringing.” This is telling of the role that eugenics, biological determinist and cultural deficit theories played in the formation of PAP policies.
To further safeguard Singapore from “genetic pollution” (Rahim, 1998: 55, Tremewan, 1994: 113), the Ministry of Labour in 1984 issued a marriage restriction between work permit holders and Singaporeans. The work permit holder would have his work permit cancelled, be deported and be permanently barred from re-entering Singapore if he were to marry a Singaporean or permanent resident without obtaining prior approval. Approval from the Commissioner for Employment would only be given if the work permit holder possesses skills and qualifications of value to Singapore.
Doesn’t sound to me like the government targets any particular race with its policies.
Deputy Prime Minister Lee Hsien Loong in 1987 rationalized that certain posts in the Singapore Armed Forces had been closed to Malays for "national security" reasons. He claimed that this policy was implemented to avoid placing Malays in an awkward position when loyalty to nation and religion came into conflict. PM Lee also added that the Malays behaved more as Malay Muslims than as loyal Singaporeans. PM Lee and DPM Lee’s statements finally made explicit what many suspected to have been an implicit rule. It could be observed that, despite being overrepresented in the civil service, Malays tend to stay in the lower-to-middle rungs of organizations like the SAF. It is also noteworthy that, to date, no Malay has held important Cabinet portfolios such as Minister of Defence, Minister of Home Affairs, Minister of Foreign Affairs, and Minister of Trade and Industry.
The conflation of loyalty to the country with approval of the ruling party proved to be patently flawed, as studies by the Institute of Policy Studies (ST, 30 Sept 1990: 22; IPS, 2010) indicate that Singaporean Malays showed a stronger sense of national pride and identification compared to the other major ethnic groups. The study also found that Citizen-Nation Psychological Ties (CNP) scores, that is, national loyalty, weakens with: higher socio-economic status, Chinese, youth, and political alienation. Even when the Malays have been historically disenfranchised, they were found to be proud to be Singaporeans, loyal to Singapore and more willing to sacrifice for the nation than the other ethnic groups.
Additionally, Minister of Defence and Deputy Prime Minister Goh Chok Tong threatened to withhold aid to the Malay self-help organization Mendaki in 1988. The threat was issued over an incident during election night where several Malays in a crowd of Workers Party supporters had jeered at PM Goh at a vote counting centre. It became apparent from this incident that any aid offered by the government was tied to loyalty to the PAP instead of it being the duty of the government to serve Singaporeans regardless of party affiliation^^.
There have always been Malay PAP Members of Parliament (MP), did they not help fight for these issues?
The Malay PAP MPs are in the unique position of having to represent not only people of their constituents but also the rest of the Malay Singaporeans while toeing the party line. With many of the government policies being unhelpful towards the Malays, it is near impossible to fulfill this role satisfactorily. PAP MPs Ahmad Haleem (Telok Blangah) and Sha’ari Tadin (Kampong Chai Chee, Bedok) were both made to enjoy early retirements from their political careers for bringing up “sensitive” issues of the Malay community^^^. This set the tone for future PAP Malay MPs to remain unquestioningly in step with the leadership, regardless of their personal agreement, in order to have a long career within the party. Today, Malay PAP MPs have continued with the trend of parroting PAP policies that ran against the interests of the Malay/Muslim community (e.g. Environment and Water Resources Minister Masagos Zulkifli and Minister-in-charge of Muslim Affairs Yaacob Ibrahim with regards to the tudung issue).
What about the Mendaki and the Tertiary Tuition Fee Subsidy (TTFS)?
The policy providing free education for all Malays was ended in 1990 despite opposition from the Malays and the opposition party[Col: 126]. In its place, Mendaki introduced TTFS in 1991 to subsidise the cost of tertiary education in local institutions for those living in low household income. Due to the long history of marginalization and the widening of the inequality gap, the number of Malays who were able to make it to tertiary education institutions, especially in local universities, have been disproportionately low compared to the other ethnic groups. As such, the number of students able to benefit from this subsidy is even lower.
It was only recently, 20 years after the introduction of the subsidy, that the criteria for eligibility underwent revision. The revision takes into account the size of the family of the applicant, allowing for more Malay students to benefit from it. However, this subsidy is only one measure in an attempt to ensure that Malays students who were able to qualify for tertiary education are able to do so. Short of totally ditching streaming, more care, thought and resources are needed to lift the quality and accessibility of education for the Malays, especially in the early years of a child’s education.
So what needs to happen now?
Singaporeans, especially politicians, need to move on from making assertions similar to what PM Lee had made in 1987, that the "problem is psychological . . . if they try hard enough and long enough, then the education gap between them and the Chinese, or them and the Indians, would close. . . . Progress or achievement depends on ability and effort." It is important for Singaporeans to recognize the nearly Sisyphean task faced by marginalized communities in improving their socio-economic standing. Handicapped right from the start, their perceived failures in our “meritocratic” society should not be judged as an indictment of their efforts, but influenced in no small measure by the failings of the state in dragging their feet to take action. As a community, Singaporeans need to actively combat negative stereotyping, and move away from policies that were rooted in eugenics. Government intervention into ensuring unbiased, fair hiring practices would also help in raising the standing of the marginalized minorities. It would be impossible for Singapore to live up to its multiracial, meritocratic ideals without making fundamental changes to the above mentioned policies.
---
# Academic journal behind a paywall. Most tertiary institutions should have partnerships with these journals, so you are likely able view them if you have a student email address.
+ Online scan of the article is unavailable
\* The declining birth-rate of the Chinese was one of three pressing national problems, according to PM Lee in a National Day rally speech in 1988; the others being education and the growing number of unmarried graduates [at approx 29 mins].
\* From Lily Zubaidah Rahim’s* The Singapore Dilemma (1998: 76-77): Rabushka’s (Rabushka, Alvin (1971), ‘Integration in Urban Malaya: Ethnic Attitudes Among Malays and Chinese’, 91-107) study found that it was common for people living in ethnically homogeneous areas to adopt favourable attitudes towards other ethnic groups. People who resided in ethnically mixed areas but did not mix with other ethnic groups were also found to hold negative attitudes towards others. He postulated that physical proximity coupled with superficial interaction across ethnic lines may in fact lead to heightened contempt for other ethnic groups. Urban studies (Fischer, Claude (1976), The Urban Experiment*) have similarly found that close physical distance of different ethnic groups does not necessarily result in narrowing the social distance between the communities. Indeed, physical ethnic proximity in large cities may well engender mutual revulsion and a heightening of ethnocentrism. These research findings have been corroborated by several Singaporean studies (Hassan, Riaz (1977),* ‘Families in Flats: A Study of Low Income Families in Public Housing’; Lai, Ah Eng (1995), ‘Meanings of Multiethnicity: A Case Study of Ethnicity and Ethnic Relations in Singapore’) which have found interethnic relations in the ethnically integrated public housing flats to be relatively superficial.
\** In the same article, PM Lee drew a straight line connecting the Malays with lower educational levels in this line of rhetoric questioning: “Why is the birth rate between the Malays, and the Chinese and Indians so different? Because the educational levels achieved are also different.”*
^ The stronger representation of Malays in civil service and Western multinational corporations was likely due to the difficulty in seeking employment in local firms. Prevalence of negative stereotyping of Malays meant that a Malay job applicant has to be much better qualified to be considered for a job in a local firm (Rahim, 1998: 25). A recent study into this phenomenon can be found here#.
^^ The PAP’s quid pro quo policy was put under the spotlight again in 2011, when PM Lee made it clear that the government’s neighbourhood upgrading programmes prioritised PAP wards over opposition wards.
^^^ PAP MP Ahmad Haleem raised the “sensitive” issue of the government’s exclusionary policy towards Malays in National Service, which adversely affected socio-economic standing of the Malay community [Col: 144]. PAP MP Sha’ari Tadin was actively involved in Malay community organizations and helped to organize a 1971 seminar on Malay participation in national development (Rahim, 1998: 90).
---
Recommended Reading:
The Myth of the Lazy Native: A study of the image of the Malays, Filipinos and Javanese from the 16th to the 20th century and its function in the ideology of colonial capitalism [pdf].
The Singapore Dilemma: The Political and Educational Marginality of the Malay Community.
Eugenics on the rise: A report from Singapore#.
Assimilation as multiracialism: The case of Singapore’s Malay#.
Racism and the Pinkerton syndrome in Singapore: effects of race on hiring decisions#.
---
References:
Bedlington, Stanley (1974), The Singapore Malay Community: The Politics of State Integration, Ph.D. thesis, Cornell University.
Chew, Peter K.H. (2008), Racism in Singapore: A Review and Recommendations for Future Research, James Cook University, Singapore.
Fook Kwang Han, Warren Fernandez, Sumiko Tan (1998) Lee Kuan Yew, the Man and His Ideas, Singapore Press Holding.
Goh, Keng Swee (1972), The Economics of Modernization and Other Essays, Singapore: Asia Pacific Press.
Michael D. Barr & Jevon Low (2005) Assimilation as multiracialism: The case of Singapore's Malays, Asian Ethnicity, 6:3, 161-182, DOI: 10.1080/14631360500226606
Rahim, Lily Z. (1998), The Singapore Dilemma: The political and educational marginality of the Malay community, Kuala Lumpur, Oxford University Press.
Shaharuddin Ma’aruf (1988), Malay Ideas on Development: From Feudal Lord to Capitalist, Times Book International, Singapore.
Tremewan, Christopher (1994), The Political Economy of Social Control in Singapore, London, Macmillan.
submitted by cherenkov_blue to singapore [link] [comments]

Beating the UK brokerage via true arbitrage - £8k -> £98k ($128k) since 21st April

Beating the UK brokerage via true arbitrage - £8k -> £98k ($128k) since 21st April
Alright you American autists, here's a gains post from the UK across the pond - listen up because it's pretty incredible, managed to screw over our broker to turn ~£8k into £98k / $128k USD by reading the small print, true u/fuzzyblankeet style.

https://preview.redd.it/9mlup18v0q951.png?width=343&format=png&auto=webp&s=aea1393d304d16063d62d54d30cc5be9b23d937a
Unfortunately, we don't have options trading, commission free robinhood which crashes, or any other US based degeneracy, but instead we British chaps can trade "CFDs" ie. 'contracts-for-difference', which are essentially naked long / short positions with a 10-20% margin (5-10x leveraged), a 'holding cost' and you could theoretically lose more than your initial margin - sounds like true wallstreetbets autism, right? Well grab a lite beer (or whatever you lite alcoholic chaps drink over there) and strap in for this stuff:
So, CMC Markets, a UK based CFD brokerage, wanted to create a West Texas Intermediate Crude Oil 'Spot' product, despite WTI contracts trading in specific monthly expirations which can thus have severe contango effects (as all of you $USO call holders who got screwed know) - this was just a product called "Crude Oil West Texas - Cash", and was pegged to the nearest front-month, but had no expiry date, only a specific holding cost -> already a degenerate idea from their part.
So in early April, just before when the WTI May-20 expiry contract 'rolled' at **negative** $-37, the "WTI Cash" was trading at $15 at the time, but the *next* month June-20 expiry was still $30+ we (I am co-running an account with an ex-Goldman colleague of mine) simultaneously entered into a long position on the "WTI - Cash" product, and went short on the "WTI Jun-20 expiry", a pure convergence play. Sure enough, the June-20 tanked the following week, and we made over £35k, realised profits. But meanwhile the May-20 also tanked, and we were down £28k. But rather than realise this loss, we figured we could just hold it until Oil prices recover, and profit on both legs of the trade.
However, CMC Markets suddenly realised they are going to lose a lot of money with negative oil prices (Interactive Brokers lost $104m, also retards), so they screwed everyone holding the "WTI - Cash" product trading at $8 at the time, and pegged it to the December 2020 expiry trading at $30, with a 'discount factor' to catch up between the two.
https://preview.redd.it/zjjzyahx0q951.png?width=517&format=png&auto=webp&s=9523bab878f06702133631f12c1109081f299f65
Now fellow autists, read the above email and try to figure out what the pure arbitrage is. CMC markets will charge us a 0.61% **per day** holding cost (calculated as the 10x levered value of whatever original margin you put up, so in our case £8k*10x=£80k*0.61% = £500 per day, £1.5k on weekends for extra fun) on our open positions, but also "increase" the position value by 0.61% per day vs. the **previous day's** WTI - Cash value. Got it yet? No? Still retarded? Here's where maths really helps you make tendies:-> If your 'cost' is fixed at 0.61% of your original levered position, but your 'gains' are 0.61% of the previous day's position, then your gains will be ever increasing, whereas your costs are fixed.
So we added some extra £££ (as much as we could justifiably put into a degenerate 10x levered CFD account) and tried to see if it works. Long story short, it does. At this point in July we were making **over £1k per day on a £8k initial position*\* regardless where the WTI Dec-20 fwd moved.
Unfortunately, eventually CMC markets realised what utter retards they were, and closed down the arbitrage loophole, applying the holding costs to the previous day's value. But not before we turned £8k into £98k, less holding costs.
https://preview.redd.it/uh0f8knz0q951.png?width=553&format=png&auto=webp&s=c7e629f72de5aeb4e837ccef44ecae708f058bee
Long story short, puts on $CMCX they're total retards, and given what a startup robinhood / other brokerages are, never assume that only they are the ones taking your tendies away, sometimes you can turn the tables on them!
submitted by mppecapital to wallstreetbets [link] [comments]

[DD] All aboard AXDX!

[DD] All aboard AXDX!
This is my first DD. I feel really good about it. I’m just your average investotradegambler, but do like to dig deep, and think I found something here. Let's go.
TL;DR
Buy AXDX calls. July/Aug/Nov exp. 15-20 strikes. Shoot for 25 for max tendies.
Go long AXDX shares on margin, too.
Why?
  • Experienced investor with an awesome track record of winning as a shareholder (and fighting for shareholder value) recently showed showing extreme confidence in the company ($25MM buy)
  • They are gonna get $ from COVID testing revenues incoming which were not expected in their business plans at all (and this is a relatively low rev company, so the boost will look great)
  • EUA for the tests < 2 weeks away from being announced - we have evidence from other applications that it should be any time now
  • Besides all that, everything on track with their normal core business and it shouldn't be much affected by COVD
Now, for the real story...
It started with a LARGE buy that caught my eye
Actually, a series of buys from Jack Schuler. Schuler has spent over 30 years in the pharmaceutical industry, including having served as President and Chief Operating Officer of Abbott Laboratories. Today, Mr. Schuler serves on the board of directors for several companies, including Accelerate Diagnostics, Quidel Corporation and Biodesix, Inc.
I'll do the math for you: that's $26.7MM of stock purchased during this dip.
OK, so insider sales don't mean everything? We don't panic when we see selling because sometimes people just need to cash out. So we cannot just assume this means anything. Can we?
Looking back at Jack's buying history - this was a v big buy for Jack
Looking back, Schuler is quite active in investing in his companies. But it's not always buys, he does sell. And if you look further back, you actually see some interesting things.
Starting with AXDX: Before the buys shown above, the last time Jack made a slew of purchases was between Aug 11 2017 and May 15 2018 when he purchased $29MM total. Note that this was over the course of a year for an average price of about $20 a share. Prior to those buys, you have to go back to Jan 2017 before he made any other bets.
In other words, Jack just bought as much stock in the last few months than he'd bought in the previous few years.
So it seems like Jack feels really good about buying this dip. Is that enough? Probably... but let's keep going.
Jack has been around the block - and Jack likes winning (Jack gets top $ for Ventana)
He's been quite successful in being an activist that fights for his shareholders. That is a great thing if you are in investor. I managed to stumble across this gem: Jack Schuler historical record of 'dirty tricks' in business. It's truly amazing. It's some dude's salty manifesto about how Jack S is a actually just a bad ass investor.
Back in 2007, Roche wanted to buy Ventana who Jack was an investor in. He has big problems with the initial price that was offered and slowed down the deal. Here's what he said:
"This is about stockholder value," said Ventana chairman Jack Schuler. "Simply put, we believe that Roche is trying to capture value for its stockholders that rightly belongs to Ventana's stockholders." Ironically, as Roche was hailing its offer as a 44% premium on Ventana's stock value of $51.95 on June 22, 2007 (the last trading day before Roche submitted its bid to Ventana), the stock has steadily risen to a recent close of more than $83.
Preach! He's not playing dirty tricks. He wants shareholder value. What's wrong with that? Long story short, the deal was hung up because Jack needed all of his tendies. It eventually went through at a 19.3% premium to Roche's initial offer on June 27, 2007. Well done, Jack! I'd certainly want him to negotiate 20% more for my shares.
Turns out Jack has a history of winning - Jack wins with Stericycle, Medtronic, and more
Digging deeper, Jack (and John Patience, the same one from the screenshot below) did the same trick with Stericycle. The buys referenced in this article were unloaded 4-5 years later for 80-100% profits.
He also did it with Medtronic in 2010. He picked up 30,000 shares at an average price of $36.93 each on June 25. Medtronic is at $93 today ($115 pre-covid) and pays a dividend. That ones seems to have worked out too.
He has other winners too. Jack. Is. A. Winner.
Is that enough?
Honestly, for you degens, yeah it should be. Jack has a strong track record. He thinks $10 is way too cheap, so he just bought an assload. Also, we know he doesn't hate money. A man like that never starts to hate money.
Did I say a COVID tailwind? Yup.
Did I mention that they have a COVID tailwind? I shit you not. It keeps getting better. You know the serology tests that determine if you've had CV? That test for antibodies? Well, turns out AXDX was perfectly set up to capitalize because they can make these. And they are planning to do so!
On top of a slow and steady growth of sales of medical devices, which is AXDX's core business, AXDX can monetize on these tests which will be really important in the coming year as the world learns how to live with COVID (knowing who has had the disease is very important). From the CEO on the earnings call in May:
Lastly, through a recently signed collaboration agreement with BioCheck Ltd, we have begun commercializing the MS-FAST fully automated chemiluminescence immunoassay analyzer and SARS-COV-2 test for the detection of IgG and IgM. This partnership has the potential to provide both an avenue to reengage prospective customers on Pheno as well as a near-term revenue uplift. The performance data for these assays are best-in-class with sensitivity and specificity estimated as exceeding 95% for both assays based on over 100 samples collected at the source of the pandemic, Wuhan, China. Since announcing the partnership on April 15, we have received several indications of interest across the global business.
We are continuing to work with the FDA on our emergency use authorization for commercialization in the U.S., and we have taken initial orders in EMEA. While we are tremendously excited about this collaboration agreement and are eager to play a role in fighting this pandemic, it remains too early to estimate the revenue potential of this opportunity. In my 30 years in diagnostics, I have never experienced a period of such profound disruption. However, with this disruption comes the creation of new opportunities, the near-term impact from this pandemic to accelerate and most other healthcare companies is significant while at the same time shining a brighter light on the value of rapid diagnostics for infectious disease.
Awesome! So, we are stumbling into quite a bit revenue we were not expecting. That's dope. More good news? Yup. The CEO references that their core product (Pheno) now has advantages due to COVID that will help future sales:
And a big part of this will be, in my opinion, will be around how do you better manage infectious disease crises, how do you better manage secondary infections, how do you better manage bed utilization and staff utilization? And those are all things that Pheno directly addresses. I mean Pheno gets patients on optimal therapy much, much quicker, two, three days quicker, and get patients out of the hospital two to five days quicker in some cases. And so with that, I mean, as healthcare providers look at these things, I mean, we fully expect them to be really having a heightened sense of interest in what we're doing in this space.
Is now the time?
I think so. First, let's check AXDX over the past 5 years:
https://preview.redd.it/0o2vw40m3j851.png?width=2734&format=png&auto=webp&s=6bd6870849fbd180cae421c934b8c6f509301dfb
In summary:
  • Lots of ups and down, but pretty consistently shoots above $20 (which will make us tendies)
  • In 2019 (pre-covid), it easily sat in the $18-$22 range.
  • We closed at $15.86 today after touching $17s yesterday and this morning. Profit raking before the weekend in the Hamptons. I'm not worried.
  • Looking back in the news on AXDX, I see no cause for concern. This is just a medical device company that's finally starting to see revenue.
You may notice the spike at the end of the chart...
Let's zoom in to the last three months - a recent run up and dip offer a chance to buy
https://preview.redd.it/fiy5eew34j851.png?width=3356&format=png&auto=webp&s=a868130d3e1a2449542e6822029ece6603088f4e
In the past month:
  • I suspect that others noticed what I have noticed, so it's been up up an away.
  • This week was especially bonkers. Up 5-10% most days. Never seen action like it.
  • But notice that today was a BIG DOWN day after 6 in a row up. It had to cool off. Maybe it cools off more Monday...? It will have reasons to go up soon that have not yet materialized (more below)
  • I see no reason why we wouldn't be headed back to ranges that it was safely in last year... especially with the tailwinds due to testing revenue, Jack S's confidence, and the recovery of markets (though AXDX is hardly affected by the shutdown).
Buy the dip, before the EUA approval!
Remember those serology tests? AXDX is within weeks, by my estimate, of getting those approved for use. What pharma company doesn't love a nice FDA approval pop?
So when will it happen? Some digging: if you check here, you can see that the FDA is pumping out these approvals.
Beckman Coulter was a recent company to get the approval, this Monday on June 29, to deliver 30MM tests a month. If you check back on their press releases, they were chirping about this in late April. So this process for them took ~2 months.
Going back to AXDX's last conference call (May 8), we can read between the lines:
We recently filed for FDA emergency use authorization for our Pheno respiratory test kit, positioning its benefits for ventilated COVID-19 patients. If approved, this authorization will provide accelerate an avenue to reengage prospective and current customers, obtain useful analytical and clinical data on this new test and help some affected patients.
And in the Q+A:
We have an EUA submitted, as I mentioned, for IgG and IgM combo test. We're also going to be submitting an EUA for individual tests for both IgG and IgM over the next couple of days. The FDA has already come back to us with a few pieces of data that we need to follow up on which is pretty standard.
And we're working on that now. And in addition to that, I would say that we are submitting for a 510(k) for the MS-FAST instrument, and we're working on that currently as well with the consultant. Accelerate is the authorized legal agent for BioCheck. And so we're basically spearheading all of the dialogue between the FDA and this opportunity which is a good thing because of the vast experience we have with the FDA already.
And so our expectation is, again I guess to be clear, there's been no setback at all relative to our submission. And the new guidance that has come out. And then the last thing I would say is the performance data that we have already submitted with the FDA is excellent data. And it already meets the requirements that they have called out.
Our sensitivity and specificity for both the IgG and IgM test or are both very solid. And again, we're continuing to work with the FDA and hope to hear some positive outcomes here over the next couple of weeks.
By the looks of it, from the statements and how press released line up, AXDX was also writing press releases in April about this, they applied to the FDA in late April or early May. Given that Beckman Coulter's process took about 2 months... I think we could be very very close to an announcement, and I'd certainly expect it before 7/17 (cough - calls - cough). [I checked a few other EUA timelines, and ~2 months is about right]
That's it. What else do you need? Go buy some AXDX because:
  • Experienced investor with an awesome track record of winning as a shareholder (and fighting for shareholder value) recently showed showing extreme confidence in the company ($25MM buy)
  • They are gonna get $ from COVID testing revenues incoming which were not expected in their business plans at all (and this is a relatively low rev company, so the boost will look great)
  • EUA for the tests < 2 weeks away from being announced - we have evidence from other applications that it should be any time now
  • Besides all that, everything on track with their normal core business and it shouldn't be much affected by COVD
What's not to like?
My positions
Jacked to the tits on 10, 12.5, 15, 17.5, and 20 calls expiring in July, Aug, and Nov. Probably $25k across those. Then another $25k or so of shares. I think I'm just over $50k invested.
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Making +500 A Day Trading Stocks With Basic Math Margin Call 3 - First Meeting - YouTube Introduction to Leverage And Margin Profit Markup vs. Margin - Simple Formula, Common Mistake ... How to Calculate Margin? - TradingBanks

But math can help you do better in stock trading. It's just a matter of recognizing risks and probabilities. Probabilities. No mathematical system, however advanced, can predict the actual future ... This means that your trading account has to be at least 2% of the value of the trade you are about to take. Margin, therefore, works as a deposit that the trader hat to provide to the broker when entering a trade. With $1.000 margin (a trading account of $1.000), you can trade up to $100.000 with a 100:1 leverage (1% margin requirement). A good Margin Trading Definition would be the practice on an exchange of trading a financial asset using borrowed fund from the exchange. The initial fund used by the trader is then called the ... Everything starts from the Forex trading account… Explaining a Margin Account. A Forex trading account is a margin account. Every transaction in an account needs a margin. If you want, the margin is a collateral for the open trade. The broker needs to make sure you can cover your losses. Because of that, handling the used margin is tricky. Margin trading refers to the practice of using borrowed funds from a broker to trade a financial asset, which forms the collateral for the loan from the broker.

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Making +500 A Day Trading Stocks With Basic Math

85% of contractors incorrectly calculate profit on their estimates. Most contractors use the markup method - but this method will leave your bottom line comi... The Math Behind Trading (Money Management, Hitrate, Risk-Reward Ratio) - Duration: 2:39. Spencer Li - The Travelling Trader 17,910 views. 2:39. Introduction to Markup and Margin Math - Duration: 12:02. Amanda Bickell ... Essential Truth Recommended for you. 9:43. Trade Ideas Scanner Live for Day trading Stock Market STOCKS ROCKS 799 ... Learn about the pros and cons to trading a portfolio margin account. We'll teach you to benefit from such margins so you do not run into common problems associated with this type of trading ... The Math Behind Trading (Money Management, Hitrate, Risk-Reward Ratio) - Duration: 2:39. Spencer Li - The Travelling Trader 17,941 views. 2:39.

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